Arabica coffee prices were very volatile last week as they came under pressure from continuing favourable weather in Brazil, and from a forecast of higher production in Brazil by IBGE. Arabica coffee prices finished the week losing 3.75 cents/lb with the second position (May 24) closing at 177.35 cents/lb. The London robusta coffee market, on the other hand, had a much better week with values forced up by concerns about delays in shipping robusta from Asia as a result of the attacks on shipping by Yemeni Houthi rebels. It finished the week gaining $212/ton (9.60 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be around 30 toea/kg lower than they were last week.
Brazil’s IBGE issued their third forecast for Brazil’s 2023/24 coffee crop this week, predicting that production would total 57 million bags, 1.2% higher than their previous estimate and 8.9% higher than last year’s harvest. Arabica output is estimated at 39.5 million bags, 1.4% higher than their previous estimate and 16.3% higher than last year’s output. The robusta (conillon) crop is estimated at 17.5 million bags, just 0.6% up on their previous forecast but 4.8% lower than last year’s production. This is attributed to a significant decline in the average yield of robusta of around 8%. A report issued this week showed that the price of shipping containers jumped by 61% this week to an average of $2,670 per 40-foot container. This is 25% higher than at the same time last year and 88% more than the average was in 2019 before the pandemic. Data from the US Commerce Department showed that the US imported 69,299,214 kilograms of coffee in November, 8.1% higher than in October. The National Consumers League, which is apparently America’s pioneering consumer advocacy organization, filed a lawsuit this week alleging that Starbucks is falsely and deceptively claiming that some of its coffee is “100% ethically sourced”. The lawsuit details widespread evidence the company relies on farms and cooperatives that commit significant labour and human rights violations, including child labour. Starbucks is refuting the evidence and saying that its CAFE practices programme is the “best in its class”.
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 strengthened a bit this week with Brazilian 3/4’s higher at minus 13; Honduras HG’s are also higher at plus 6; but Kenya AB FAQ’s continue to be steady at between plus 60 and plus 75; while Colombian UGQ’s are higher at plus 12. So, without any update on PNG Y1’s, I would guess that they might also be slightly higher at around minus 3. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price somewhere between 173.70 cents/lb and 180.60 cents/lb.
The outlook remains very mixed with the violence in the Middle-Esat threatening to escalate, creating even further disruption to shipping and inevitably a further increase in container costs. This will force up prices to consumers and thus dent demand, although at the moment, it appears to be having the opposite effect on robusta prices, most of which have to sail through the Suez Canal to reach Europe. New York will be closed on Monday, but it is hard to see that this will change the overall market sentiment, which appears to be somewhat bearish. It therefore seems inevitable that prices will come under further pressure next week.
Source:
Mick Wheeler, UK.