Weekly Market Report 16th April 2023

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Weekly Market Report 16th April 2023

It is not immediately obvious why coffee prices have rallied this week.  The push upwards has not been smooth with prices falling only to rise strongly the next day and so on throughout the week.  Higher oil prices have certainly changed sentiment but lower than anticipated exports from Brazil and Colombia may also have played a part.  Arabica coffee prices gained 9.80 cents/lb, with the second position closing at 191.50 cents/lb.  The robusta market followed suit and finished the week $88/ton (4.00 cents/lb) higher.  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 75 to 80 toea/kg higher than they were last week.

Colombia’s FNC highlighted this week that its March 23 exports fell 19.0% from March 22 to 906,000 bags.  Furthermore, CeCafe data released this week shows that Brazil exported 2.8 million bags of green coffee in March, down 19.4% from the 3.5 million bags exported during March last year.  Arabica exports totalled 2.7 million bags, while conillon (robusta) exports were just 107,267 bags, down 20.9% from the same month last year.  Safras & Mercardo, a Brazilian based agricultural consultancy, have forecast that the 2023/24 Brazilian crop will be 66.6 million bags, 13.5 % higher than last year’s crop. Arabica output is put at 43.5 million bags and conillon at 23.25 million bags. However, this is on the high side and another forecast issued this week by Brazil’s IBGE has forecast Brazil’s 2023/24 crop at 55.7 million bags, which is on the low side.  Arabica output is estimated at 38.5 million bags and conillon at 17.2 million bags.  The latest IMF report suggests that prospects for the global economy may be improving slightly.  They believe that inflation is slowly falling, but that global economic growth remains at historically low levels and that financial risks have risen.  Nevertheless, they point to the fact that supply chain disruptions are beginning to unwind, while dislocations to energy and food markets caused by the war in Ukraine are receding. They forecast that growth will bottom out at 2.8% this year before rising modestly to 3% next year.

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 appear to have come under a bit of pressure this week with Brazilian 3/4’s lower at minus 1, Honduras HG’s are also lower at plus 21; Kenya AB FAQ’s are steady at between plus 40 and plus 65; but Colombian UGQ’s are lower at plus 46.  For PNG Y1’s, I can only guess that they too will have fallen a bit to around plus 9/10.  Therefore, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price between 196.80 cents/lb and 208.10 cents/lb.

Once again this week’s price rise was unexpected, but it suggests that market participants are concerned about the supply/demand balance and despite the few higher estimates for the upcoming Brazilian harvest they clearly believe that the crop will probably come in at around 60 million bags.  That figure suggests another deficit.  However the volatility seen this week is a concern with prices falling on 3 days of the week and only rising, albeit strongly, on 2 days.  The outlook therefore remains uncertain and there is chance that profit taking next week will force prices lower, although the bullish sentiment which has gripped the market for the last 2 weeks may counteract that and keep prices roughly where they are now.                                                                                                                                                                    

Mick Wheeler, UK.

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