The week started off on a positive note but then stumbled mid-week, losing all that it gained and more, before rallying on Friday to end the week virtually unchanged. Over the week arabica coffee prices gained just 0.05 cents/lb with the second position closing at 177.80 cents/lb. The robusta market barely moved during the first four days of the week gaining just $4/ton, but then lost that and more on Friday to finish the week $22/ton (1.00 cent/lb) lower. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be roughly the same as they were last week.
The volatility seen this week reflects the continuing uncertainty surrounding the size of the upcoming crop in Brazil with market players still really unsure who to believe. The growers report that the crop will be seriously below the expectations of the trade and other various agencies, but they clearly have a vested interest in being pessimistic. The latest data from the Brazil Coffee Export Association (CeCafe) shows that Brazil exported 2.1 million bags of green coffee in February, down 35.8% from the 3.3 million bags exported in February last year. Arabica exports totalled 2 million bags, down 35.5% on February 2022, while robusta exports amounted to 83,361 bags down 42.1%. Some have attributed the drop to the fact that Brazil was closed for almost 5 days due to carnival, but this does not ring true as carnival happens every February. Colombia’s FNC reported this week that the country’s production during February was up 10% versus February 2022. However, exports fell 6% to 928,000 bags from 983,000 bags during February 2022. Politics seem to be dominating the selection process for the new head of the FNC. The previous incumbent Roberto Velez was asked to step down by the new Colombian President, Gustavo Petro, and thus the FNC set up a committee to select a short list of candidates for the position. They did so this week, but the Government rejected that list saying that it did not contain enough women. There was one woman on the list, who was considered to be the front runner by many, but obviously the Government want a more diverse list of candidates to choose from, or maybe they have someone in particular in mind.
I still cannot get access to any reliable regularly-published data on price differentials, so once again I have had to use sources, the accuracy of which cannot be guaranteed. Physical price differentials appear to have been fairly stable this week with Brazilian 3/4’s continuing to be quoted at plus 3, Honduras HG’s remain at plus 29; Kenya AB FAQ’s are also unmoved at between plus 90 and plus 110; Colombian UGQ’s remain at plus 55. Without seeing any new quotes for PNG Y1’s, I can only guess that they may also be stable at around plus 15. Consequently, had an exporter fixed on Friday in New York for May/June delivery he may have been able to secure a price between 188.75 cents/lb and 194.20 cents/lb.
The outlook is somewhat hard to predict at the moment as it is clear that many market participants are biding their time waiting for a firm indication as to what will happen to the upcoming Brazilian harvest. All the signals at the moment are mixed and thus rather confusing but with the robusta harvest due to commence in just a few weeks’ time, it will not be long before a clearer picture emerges. That will not be next week however, so the outlook remains rather murky, so there is a good chance that both markets will remain volatile but, with luck, may end up roughly where they are now.
Source:
Mick Wheeler, UK.