Both markets had an extremely volatile week experiencing huge fluctuations on a daily basis with arabica coffee prices seeing swings of between 15 and 20 cents/lb on most days, although on Monday saw a rise of over 24 cents/lb. Arabica coffee prices reached another record high on Thursday, but it proved unsustainable and fell back heavily on Friday losing over 19 cents/lb. Despite this, however, arabica coffee prices still managed to gain 15.40 cents/lb over the week, with the second position closing at 419.75 cents/lb. The robusta market had a very similar week and managed to regain all that it lost last week plus a little, more gaining $162/ton (7.25 cents/lb). 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 they were last week.
Various reasons have been put forward for this week’s volatility, ranging from speculators taking their profits to the fact that some Index funds are rolling over their positions, although while there is probably an element of truth in both explanations a more likely explanation is the incredible uncertainty that surrounds the size of Brazil’s upcoming crop. Different forecasts exist and the continuing unpredictable weather makes all forecasts unreliable, hence the volatility. Another factor which certainly affected all markets this week was the latest inflation data from the US, which showed that consumer prices rose 0.5% in January, or 3% over the last 12 months The latest data from the Brazil Coffee Export Association (CeCafe) shows that Brazil exported 3.6 million bags of green coffee in January, down 3.8% from the 3.7 million bags exported during the same month last year. Arabica exports totalled 3.28 million bags, down 0.3% on January 2024. Conillon (robusta) exports totalled 328,074 bags, almost 29% lower than was exported in January last year. We tend to think that high prices are good for all producers but in Brazil, the coffee merchant Central do Cafe has been forced to suspend all of its operations temporarily this week as it seeks to renegotiate its debts.
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. The continued upward surge in prices seen over the last few weeks has forced many roasters to sit on the sidelines and wait for prices to fall. As a result, physical price differentials have been hammered lower this week. Brazilian 3/4’s are quoted at minus 19; Honduras HG’s are 6 cents lower at minus 2; Kenya AB FAQ’s, are also much lower at between parity and plus 10; Colombian UGQ’s are 5 cents lower at plus 2. I can only assume, therefore, that PNG Y1’s are also much lower at around minus 9/10. Thus, had an exporter fixed on Friday in New York for May delivery he may have been able to secure a price somewhere between 401.60 cents/lb and 428.15 cents/lb. It is anyone’s guess which way prices might go next week, but what appears almost certain is that both markets will be volatile. Having reached record highs and then retreated quite dramatically it is difficult to think that prices might surge to new heights this week, but anything is possible. However, on balance, as I said last week, it would come as no surprise if coffee prices both arabica and robusta coffee prices were to finish the week lower, but you should bear in mind that I have predicted the same thing for the last 3 weeks and been wrong.
Source:
Mick Wheeler, UK.