Both markets continued their downward path during the early part of the week, but then stabilised and started to slowly recover. The recovery however, was not sufficient to regain all of the earlier losses but may well indicate a change of sentiment. Arabica coffee prices lost 4.75 cents/lb with the second position (July 24) closing at 201.15 cents/lb. The robusta market followed a similar path to arabica and finished the week losing US$101/ton (4.60 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 35 and 40 toea/kg lower than what they were last week.
Local reports suggest that at least 40% of the coffee trees in the Dak Lak province of Vietnam, a province that produces around a third of Vietnam’s coffee production, have not received enough water this year. Indeed, rainfall in the province is 50 % lower this month than in the same month last year. So, it is no surprise that Government data shows that Vietnam exported 152,073 tons (2.535 million bags) of coffee in April, a decrease of 19.5% from that which was exported during March. The USDA have started to publish their country reports prior to their main report in June. The first of these reports is on India where their attaché estimates that India’s 2024/25 coffee crop will be 6 million bags. Arabica production is estimated at 1.4 million bags while the robusta crop is estimated at 4.6 million bags. The attaché attributes these slightly lower forecast to lower yields resulting from poor rains after the main monsoon. Reports from Colombia suggest that the country’s coffee crop is being hit by the abrupt change from dry weather to heavy rains, which is causing landslides in some coffee-producing areas. Colombia had been experiencing an intense drought which was linked to the El Niño weather phenomenon from September through to late March. However heavy rainfall seen since then has caused widespread flooding and mudslides and with the La Nina weather phenomenon predicted to start in June, which is frequently associated with heavy rain, the country looks to be in for a torrid time.
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 have stabilised and, in some cases, improved probably as a result of the fall in futures prices. Brazilian 3/4’s are slightly higher at minus 14; Honduras HG’s are also higher at plus 7; Similarly Kenya AB FAQ’s are also higher at between plus 40 and plus 55; but Colombian UGQ’s continue to be steady at plus 14. Without any regular updates on PNG Y1’s I can only guess that they might also be steady at around plus 3. Therefore, had an exporter fixed on Friday in New York for September/October delivery he may have been able to secure a price somewhere between 200.45 cents/lb and 205.15 cents/lb.
It is still too early to say whether the rout is over. The pattern of trading seen throughout the week tends to suggest that this might be so, but equally it may well also signal just a pause before further downward adjustment takes place. There can be no doubt that weather related incidents are playing havoc with coffee production in a number of origins, but with certified stocks on both markets continuing to rise and the major producers still exporting significant amounts of coffee, there seems to be no real apparent lack of supply. Thus, while prices will continue to be volatile, they might, with luck, end the week very close to where they are now.
Source:
Mick Wheeler, UK.