It was a brutal start to the week with arabica coffee prices plunging almost 15 cent/lb by Wednesday but a strong bounce on Thursday and Friday cut the losses to just 5.95 cents/lb. At the end of the week the second position closed at 152.55 cents/lb. Robusta prices on the other hand, initially followed arabica prices down but the bounce was much stronger, so much so that by the close of the week robusta coffee prices were $91/ton (4.10 cents/lb) higher. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 45 and 50 toea/kg lower than what they were last week.
The collapse earlier in the week appears to be attributable to the continuing rain in Brazil but movements in currencies (especially the weakening of the Brazilian Real following the riots in Brasilia over the weekend) also played a part. In their final estimate for Brazil’s 2022/23 coffee crop, Brazil’s IBGE has estimated total production at 52.3 million bags, an increase of 0.3% compared to their previous estimate last month, and an increase of 6.8% compared to 2021. Arabica production is put at 33.9 million bags (up 0.4%) while robusta output is estimated at 18.4 million bags, (up 0.1%). By way of contrast Bloomberg has recently estimated the 2022/23 crop was around 56 million bags and has forecast that next year’s crop (2023/34) will be around 65 million bags. Data from the Vietnam Customs Authority showed that the country exported 3.28 million bags in December, up 53.5% from November, bringing exports for the first 3 months of the coffee year to a total of 6.69 million bags, an increase of 6.78% from the same period last year. The Coffee Board of India has revised their estimate for the 2022/23 coffee crop down by 8.4% to 6.00 million bags from their earlier estimate of 6.56 million bags. Arabica output is now put at 1.69 million bags, while robusta production is now put at 4.32 million bags.
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 have been mixed this week but none have weakened. Despite all the hype there is clearly a shortage of Brazilian coffees as the differentials continue to climb with Brazilian 3/4’s now being quoted at plus 2; Honduras HG’s are steady at plus 38; as are Kenya AB FAQ’s at between plus 65 and plus 90; Colombian UGQ’s are also steady at plus 61. Without any update on PNG Y1’s, I would guess that they might also be steady at around plus 4. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price between 151.85 cents/lb and 157.25 cents/lb.
The strong bounce seen on Thursday and Friday is encouraging but it was not enough to recover the losses made earlier in the week. Market players clearly believe that Brazil will produce a big crop next year but the rise in physical price differentials suggest that Brazilian farmers are in no hurry to sell and clearly believe that the crop will not be as large as the trade houses would have the market believe. However, growers are always more optimistic that the trade so that may not mean that much. New York will be closed on Monday for Martin Luther Day and the GCA figures will be released on Tuesday and the market will be expecting a small dip in the numbers. Despite the bounce this week, the outlook still remains bearish and further price falls cannot be ruled out.
Mick Wheeler, UK.