Weekly Market Report 14th August 2022

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Weekly Market Report 14th August 2022

Arabica coffee prices made larger than expected gains this week as the volume of stocks certified against the New York market slumped to well below 600,000 bags. There is also a degree of nervousness about the continuing dry weather in Brazil, which many analysts now believe will have impacted the potential of next year’s crop. A fall in the value of the dollar also added support. As a result, arabica coffee prices finished the week 16.00 cents/lb higher while robusta prices had a fantastic week gaining $219/ton (9.95 cents/lb) as it is now clear that supplies from Vietnam and Brazil are not as plentiful as many had hoped. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 115 and 120 toea/kg higher than what they were last week.

The Brazilian Institute of Geography and Statistics (IBGE), which is the agency responsible for official collection of statistical and related environmental information, has estimated that Brazil’s 2022 coffee crop will be 53.2 million bags, 0.8% higher than the estimate they made last month. Arabica production is put at 35.1 million bags, up 9.6% on last year, while robusta output has been estimated at 18.1 million bags, up 6.8% on 2021. Various reports suggest that the arabica harvest in Brazil is nearing completion and should be finished in the next couple of weeks, with most areas now 90% to 95% complete. Data from Brazil’s Coffee Export Association (CeCafe) suggests that Brazil exported 2.17 million bags of green coffee in July, down 15.8% from the 2.6 million bags exported during the same month last year. Arabica exports totalled 2.02 million bags, down 6.5% from the 2.16 million bags exported in July 2021. Robusta exports totalled 144,625 bags, 64.8% lower than the 410,766 bags exported in July 2021. The German Coffee Association (DKV) announced very positive results from their annual survey of coffee consumption in Germany. They report that German coffee consumption in the second quarter of 2022 was above pre-pandemic levels, with the consumers they surveyed drinking 3.8 cups per person per day. This is 5% more than was recorded in 2021 and 9% above the 3.5 cups consumed in the pre-pandemic year of 2019.

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. Surprisingly, despite the volatility seen this week, physical price differentials remain relatively stable. Brazilian 3/4’s however are slightly lower at minus 15; Honduras HG’s are steady at plus 44; Similarly Kenya AB FAQ’s remain at between plus 85 and plus 100; Colombian UGQ’s are seemingly unmoved at plus 75/76. Without any update on PNG Y1’s, I would guess (and it is just a guess) that they might also be unmoved at around plus 7. Therefore, had an exporter fixed on Friday in New York for Dec/Jan delivery he may have been able to secure a price between 224.15 cents/lb and 230.40 cents/lb.

This week’s increase was something of a surprise, for while it was clear that a bounce might take place this week, the fact that prices rose every day, leading to a much larger increase than anticipated, was certainly unexpected. However, rain is forecast for the week after next in Brazil and some southern areas of Brazil will see rain this week. There is speculation that this might trigger an early flowering, which may or may not be a good thing depending on the weather thereafter. Given the rise seen on both markets, there probably will be a small pause next week, during which prices will remain very close to where they are now.

Mick Wheeler, UK

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