Weekly Market Report – 14 February 2021

Arabica coffee prices remained under pressure all week suffering small losses practically every day. This was the result of a number of factors including continuing bad news about the effects of the pandemic on consumption, a weaker Brazilian Real, further wet weather in Brazil and an increase in certified stocks. Robusta coffee prices however, had a better week although still relatively quiet, but the main driver appears to have been the continued shortage of containers for shipping coffee out of Vietnam. Arabica coffee prices lost 3.60 cents/lb over the week while robusta coffee prices gained $8/ton (0.35 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 around 25 to 30 toea/kg lower than what they were last week.

Brazil’s Institute of Geography and Statistics (IBGE) has forecast that Brazil’s 2021/22 crop will be around 45 million bags, down 27.3% on last year’s total. Arabica production is estimated at 31.6 million bags, 33.6% less than last year, while robusta or conillon output is put at 13.45 million bags, down 6.7%. Problems continue to exist in Honduras with exports down significantly falling to around 5.6 million bags, down from an initial estimate of 6.22 million bags as a result of the earlier hurricane and a tropical storm. In addition, the pandemic has seriously affected the supply of labour to pick the crop in the country. As a result, coffee growers in Honduras are demanding a government bailout with loans at low interest rates and carrying a long grace period. A recent report, Project Café UK 2021, has revealed that the UK branded coffee shop market, estimated to be valued at around £3bn has suffered a decline in sales over the last 12 months of around 40%. The market now comprises 9,159 outlets, a net decrease of 182 stores over the period. This excludes the independent sector which is thought to have suffered even more. Interestingly, the UK’s three largest branded café chains, Costa Coffee, Greggs and Starbucks all opened up new stores during the year, while Caffè Nero closed 16 stores.

Once again, I have not been able to access any formal reports from Traders this week, but other sources of data (which I cannot stress enough are not as reliable, nor unfortunately as up to date) suggest that movements in physical price differentials may have been relatively mixed this week. Brazilian 3 /4’s, appear to be slightly higher at around minus 22; Honduras HG’s, however are lower at plus 22; Kenya AB FAQ’s continue to be unmoved at plus 75/90; as do Colombian UGQ’s at plus 50; PNG Y1’s however appear to be ever so slightly higher at plus 8/9. If an exporter had fixed a price on Friday for May/June delivery, he should have secured a price somewhere between 130.10 and 132.30 cents/lb.

This week’s fall although unexpected is not altogether surprising. The market appears to be dominated by speculators who, at the moment, appear to favour being short. Roasters, on the other hand appear to be buying into the dips and thus seemingly unwilling to take any sort of long position. With the New York market closed on Monday for the President’s Day holiday, Brazil enjoying a scaled down Carnival and Vietnam celebrating the Tet holiday, it has all the makings of being a quiet week. But there are no guarantees that this will be so. There appears to be a fairly firm base around 120 cents/lb, which should hold, but it is difficult to see any reason for any possible upward momentum. So once again the outlook is for prices to remain relatively stable this week.

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