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Weekly Market Report – 17th March 2024

Another indecisive week for both markets, with conflicting news pushing the markets higher, then lower, almost on a daily basis. Arabica coffee prices, however, finished the week slightly lower, losing 2.25 cents/lb with the second position (May 24) closing at 183.95 cents/lb. Robusta coffee prices fared marginally better to finish the week gaining $11/ton (0.50 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 15 to 20 toea/kg lower than what they were last week.

Brazil’s IBGE revised their forecast for the country’s upcoming coffee crop this week to 59.3 million bags, an increase of 0.4% from the forecast they published month .This would also be around 4% higher than what they said was produced last year. Marex (a global commodity and financial broker) on the other hand, has forecast that Brazil’s upcoming coffee crop will total 69.3 million bags, of which 46.5 million bags will be arabica and 22.8 million bags robusta. An increase of around 3 million bags (4.5%) on what they estimated Brazil produced last year. Globally they foresee production at 177.5 million bags with demand at 173.6 million bags, suggesting a 3.9 million bag surplus. Interestingly they suggest that while there may be an overall supply surplus, there will still be a of 2.7 million bags deficit of robusta, which will be offset by a 6.6 million bag excess of arabica. The latest data from the Brazil Coffee Export Association (CeCafe) showed that Brazil exported 3.37 million bags of green coffee in February, up a whopping 57.5% from the 2.14 million bags exported during February last year. Arabica exports totalled 2.8 million bags, up 36.5%, while robusta exports totalled 570,361 bags, almost 6 times larger than what they exported last February. The average retail cost of roast and ground coffee in US cities during February 2024 was $6.09/lb. While this is some 25 cents/lb lower than at the same time last year, it is still well above $6.00/lb and thus still very close to the $6.46/lb level seen in December 2022.

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. Physical price differentials have been, maybe unsurprisingly, stable this week with Brazilian 3/4’s steady at minus 14; similarly Honduras HG’s are steady at plus 6; as are Kenya AB FAQ’s at between plus 45 and plus 70; Colombian UGQ’s remain unchanged at plus 15. So, without any update on PNG Y1’s, I can only guess that they might also be unchanged at around minus 2/3. Therefore, had an exporter fixed on Friday in New York for May/June delivery he may have been able to secure a price somewhere between 180.05 cents/lb and 183.10 cents/lb.

The weather in Brazil has turned drier but there is further rain forecast during the next 2 weeks, so it should not be that much of a problem. Of some concern is the fact that certified stocks have continued to increase, rising by almost 64,000 bags over the week. However, there is some good news with Fitch Ratings raising its 2024 global GDP growth forecast by 0.3% to 2.4% in its latest Global Economic Outlook. This reflects a sharp upward revision to the US growth forecast to 2.1%, from 1.2%. This suggests that global demand for coffee over the year to come might be better than many expect. Even so, the more immediate outlook is not looking too bright and it can be anticipated that arabica coffee prices will probably come under pressure this week, although robusta prices should remain strong.

Source:

Mick Wheeler, UK.

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