A strange week in which the lack of any positive fundamental news combined with a stronger US dollar pushed prices down. There was a bit of a rally on Wednesday, but it lacked conviction and above all momentum, especially as other commodity and equity markets were also subject to the same malaise. Over the week arabica coffee prices retreated by 4.05 cents/lb while robusta prices fell by just $19/ton (0.90 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be between 30 and 35 toea/kg lower than what they were last week.

There was some light rain in some coffee growing regions earlier on in the week, but everyone agreed that it would have a negligible effect on soil moisture in those regions. Nevertheless the fact that it rained would have been seen by some speculators as negative. The latest data from the Brazil Coffee Export Association (CeCafe) showed that Brazil exported 2.34 million bags of green coffee in May, down 20.5% from the 2.94 million bags exported in May last year. Arabica exports totalled 2.05 million, while robusta exports accounted for 287,627 bags. This means that cumulative exports for the first five months of the 2021 calendar year have reached 16.2 million bags, which is 6.6% higher year on year. Arabica exports accounted for 14.7 million bags of this total while Robusta exports were 1.5 million bags. Reports suggest that some international coffee buyers have suspended the use and purchase of Colombian arabica coffee due to delays and non-compliance of contracts. This is the result of the ongoing civil unrest in the country which continues to affect road transport in the country. The Head of the FNC said this week that only 32% of coffee truckers have been able to reach Caribbean ports equivalent to 25 vehicles a day compared to 80 vehicles in a normal period. Peru’s coffee exports in the calendar year are expected to increase by between 5% and 10% to around 3.7 million bags. This is the result of higher yields in the country which are attributed to a major renovation scheme launched in 2017, which saw the renovation of between 40,000 and 60,000 coffee hectares.

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. Overall physical price differentials appear to have remained relatively stable this week with Brazilian 3 /4’s, unmoved around minus 23; Honduras HG’s remain quoted at plus 24; similarly, Kenya AB FAQ’s continue at plus 110/120; Colombian UGQ’s are steady at plus 55; as are PNG Y1’s at plus 10. If an exporter had fixed a price on Friday for September/ October delivery, he should have secured a price somewhere between 169.35 and 172.80 cents/lb.

Market participants appear uncertain as to what to do next. There is now clear evidence that the crop in Brazil has been substantially damaged by the earlier drought and the lack of rainfall at the moment although typical of this time of the year, will have an effect on next year’s crop. However, exports from Brazil continue apace and other origins appear to be filling in some, but not all, of the gaps. The situation in Colombia although serious, is seen as a purely temporary inconvenience and one that will correct itself in due course. Next week release of the GCA stock figures will however give a much clearer idea of what is going on with demand and may be a major factor in any price movement next week. On balance there is a good chance that prices might appreciate next week but it could easily go either way.