Contrary to expectations both markets opened the week on a negative note primarily in response to a strengthening US dollar. However, by midweek reports of irregular weather patterns in Eastern Brazil and increasing long bouts of dry weather were a cause for concern and reversed the outlook pushing prices on both markets higher. Arabica coffee prices finished the week 4.50 cents/lb higher (almost identical what they lost the week before), while robusta coffee prices gained $35/ton (1.5 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be between 30 and 35 toea/kg higher than what they were last week.

It had been anticipated that Brazil’s IBGE would release its first forecast of the 2021/22 crop this week but instead it published its final estimate of the 2020/21 crop putting it at 61.27 million bags up 2.7% from their previous estimate. Brazilian exporter Grup Montesanto Tavares however has forecast Brazil’s upcoming 2021/22 harvest at 52.9 million bags, down 23% from the 68.21 million bags they estimated was produced in 2020/21. The arabica crop is put at 31.23 million bags, down 37% year on year and the robusta crop 17% higher at 21.67 million bags. The hurricane and torrential rain that hit the coffee crop in Honduras late last year appears to be takings its toll on output with exports in the first quarter of the coffee year down by 44% to 478,8000 bags (down from 858,000 bags last year). There has also be a large increase in the incidence of coffee leaf rust in many areas of the country. In a report published this week Allegra Strategies has estimated that the branded coffee shop segment in the US has lost almost of a third of its turnover, falling from just over $36 billion in 2019 to around $24.5 billion in 2020. The number of branded coffee shops is estimated to have fallen by 0.6% to 37,189 outlets. They suggest however that the decline has not been uniform with outlets in major cities suffering more than those in the suburbs as those working from home have switched their custom to more local stores, albeit via drive-throughs and take-away’s.

Once again, I have not been able to access any formal reports from Traders this week, but other sources of data (which I cannot stress enough are not as reliable) suggest that there may have been some mixed movement in physical price differentials this week. Brazilian 3 /4’s, are apparently lower at around minus 23; but Honduras HG’s, maybe reflecting the slowdown in exports, are higher at plus 25; Kenya AB FAQ’s, appear to be steady at plus 75/90; as do Colombian UGQ’s at plus 49; PNG Y1’s also appear unmoved at plus 7. If an exporter had fixed a price on Friday for May/June delivery, he should have secured a price somewhere between 135.90 and 140.75 cents/lb.

The US GCA stock figures were published on Friday after the markets had closed and showed an increase of 169,195 bags. This is higher than in previous years and may be seen as further evidence of a decline in demand as a result of the pandemic. However, whether this will be enough to reverse the bullish tone caused by Brazilian weather concerns is difficult to assess although it may well slow things down. On the other hand, US Port Stocks statistics appear to show that the total is in decline, so the picture is not that clear. Furthermore, the markets will be closed on Monday for Martin Luther day. The outlook therefore looks rather uncertain but the bullish tone in the second half of last week suggests that with luck prices might continue to remain firm or even close slightly higher next week.