Despite a promising start to the week on Monday, arabica coffee prices came under pressure throughout the rest of the week, reflecting concerns about a slowdown in China’s economic growth and better than anticipated exports from Brazil. Arabica Coffee prices finished the week down 3.20 cents/lb with the second position (December) for arabica closing the week at 157.70. Robusta coffee prices followed a slightly different path to arabica, reflecting the fact that Brazil’s robusta crop is lower than expected and demand appears to be increasing. As a result, robusta prices gained $29/ton (1.30 cents/lb) over the week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 25 toea/kg lower than they were last week.
The latest data from the Brazil Coffee Export Association (CeCafe) showed that Brazil exported 2.7 million bags of green coffee in July, up 22% from the 2.2 million bags exported during the same month last year. Arabica exports totalled 2.19 million bags, 6.5% higher than that exported in July 2022, while robusta exports totalled 505,153 bags, up 245%. However, the largest robusta cooperative in Brazil, Cooabriel, reported this week that they believe that production amongst their members has fallen by around 17%. Colombia’s FNC reported this week that exports during July were down 17% and that the 12-month total was also down at 10.36 million bags, 16% lower than the total at this time last year. And as if to add to the pressure being felt in the Colombian coffee industry, the Colombian Government has submitted a new labour bill to Congress which aims to reduce the working week to 42 hours and will effectively raise labour costs. The new President’s attempts to get a similar bill passed has, so far, failed and there is doubt that he will succeed this time, but the industry remains wary. Some good news this week with the US import data showing that America imported 2.3% more green arabica coffee during July than it did in June.
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. Movements in physical price differentials appear to have been mixed this week with no discernible pattern. Brazilian 3/4’s are unchanged at minus 15; but Honduras HG’s, are lower at plus 11; Kenya AB FAQ’s, are steady at between plus 45 and plus 70; but Colombian UGQ’s are lower at plus 30. Without any update on PNG Y1’s, I would guess that they might also be lower at around plus 1, but I have seen some quotes much higher than this. Therefore, had an exporter fixed on Friday in New York for November/December delivery he may have been able to secure a price between 157.00 cents/lb and 160.20 cents/lb. Although prices came under pressure this week, they still remain above the 155 cents/lb level below which there seems to be strong resistance. The harvest in Brazil is progressing ahead of schedule and the weather forecasts suggest that there it will remain dry for the next couple of weeks. More worryingly the forecast also suggests that rains to the coffee growing areas in Brazil will return in September which will be very beneficial for the development of next year’s crop. The outlook therefore remains negative but there is no reason to suspect that prices will make a major move downwards anytime soon. Prices should therefore remain relatively close to where they are now.
Source:
Mick Wheeler, UK.