As anticipated it was a volatile week on both markets, although the daily movements were more muted than of late. However, a combination of concern about the short term availability of coffee with certified stocks continuing to fall together with the prospect of drier weather in Brazil pushed prices slightly higher, although profit taking throughout the week put a limit on any gains.. Arabica coffee prices ended the week up 1.40 cents/lb with the second position (March 24) closing at 170.55 cents/lb. Robusta coffee prices movements virtually mirrored New York to finish the week up $49/ton (2.20 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 10 toea/kg higher than they were last week.
ICE certified stocks continue to fall, shrinking by almost 58,000 bags over the week to total 302,235 bags. Similarly stock levels certified against the London exchange are also lower at around 667,000 bags, down from almost 1.4 million bags at the end of May. The FNC announced this week that Colombia produced 1.16 million bags of green coffee in October 2023, up 30% on year. This increase is seen as significant as it suggests that output may now be recovering after the country witnessed falling production as a result of experiencing 32 months of torrential rains. At the Sintercafe conference in Costa Rica this week Keith Flury, Head of Coffee Research with Sucden Financial forecast that Brazil would produce 50 million bags of arabica next year, up from 43 million produced in this year. He went on further to say that he anticipated that global arabica production in the upcoming crop year would be 11 million bags higher, with Brazil accounting for 8.5 million bags more, Colombia 1.3 million more and around 1.2 million bags more from other arabica producing countries. Overall, Flury projected the 2023/24 coffee year will see a surplus of arabica and a deficit of robusta coffee. At the same conference an analyst from the Middle East stated that there are over 9,000 branded coffee shops across the region and suggested that imports into the UAE totalled 8.20 million bags, an increase of 33% since 2018.
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. The price increases seen over the last few weeks have taken their toll on physical price differentials which have all weakened this week. Brazilian 3/4’s are a cent lower at minus 15; Honduras HG’s are lower at plus 6; however Kenya AB FAQ’s continue at between plus 60 and plus 75; Colombian UGQ’s are lower at plus 16. Without any update on PNG Y1’s, I would guess that they might also be lower at around minus 2, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 166.90 cents/lb and 171.95 cents/lb. The continuing volatility clearly reflects the uncertainty that exists about the outlook, especially given the fact that the weather in Brazil looks like it will be drier over the next few weeks, although some scattered showers are predicted. Furthermore, longer term forecasts suggest that rain will return at the end of the month. The continuing fall in certified stocks remains a concern especially as there appears to be very little coffee pending grading. So the outlook for the week ahead is decidedly murky. It will be volatile but there is a good chance that prices might finish the week very close to where are now.
Mick Wheeler, UK.