An incredible week which saw both markets rally strongly on heightened concern about the size of next year’s crop in Brazil. Both markets made substantial gains every day of the week with the arabica market ending the week 32.50 cents higher than at the start, with the second position closing at 285.60 cents/lb. Robusta prices made equally impressive gains, although somewhat more muted than arabica, gaining $397/ton (18.00 cents/lb) over the period. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 250 and 255 toea/kg higher than they were last week.
The catalyst for this increase appears to have been the circulation of photos which show widespread abortion of flowers in many different regions of Brazil. It is always difficult to verify whether such photos are real or not but the fact that the market continued to climb throughout the week suggests that they must be. However a survey undertaken by StoneX, a Miami based trading house suggested that next year’s crop 2025/26 will be in the region of 65.6 million bags, very similar to what they estimate Brazil produced this year. Arabica, production is expected to decline by 10.5% to around 40 million bags, but robusta production is projected at 25.6 million bags, up 21%. Also of note is the latest data from the Brazil’s CeCafe which shows that Brazil exported 4.6 million bags of green coffee in October, up 10.5% from the 4.1 million bags exported during the same month last year. Arabica exports totalled 3.7 million bags, up 7.2%, while robusta exports totalled 871,171 bags, up 27% on that exported in October last year. Torrential rainfall across Colombia this week is causing havoc to both the coffee and cocoa industries there, damaging the crops as well as hindering harvesting. The country’s typical rainy season has been exacerbated this month by cyclones, hurricanes and tropical storms moving through the Caribbean, causing heavy flooding and landslides. The latest reports suggest that the situation had improved by the end of the week, but it will be some time before all the damage can be properly assessed.
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 appear virtually unmoved, but this may may have more to do with the speed of this week’s increase than the absence of change. Brazilian 3/4’s appear to be steady at minus 15; Similarly Honduras HG’s remain at plus 12; Kenya AB FAQ’s, at between plus 30 and plus 40; and Colombian UGQ’s at plus 14. PNG Y1’s will also be lower, but for now are probably unmoved at around minus 7. Thus, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 268.40 cents/lb and 278.60 cents/lb.
It is certainly possible that prices will continue to escalate throughout the week to come, with some analysts believing that arabica coffee prices will top $3.00/lb. This might be a bit optimistic though, for while the widespread abortion of flowers certainly suggests that the crop will be lower, there is still plenty of time for additional flowerings, although the more flowerings there are, the lower the quality of the coffee produced. It is also possible that we may see a massive correction downwards, although I would not expect to lose all the gains made this week. The outlook however remains reasonably positive, and although there will be continued volatility, prices might finished the week slightly higher.
Source:
Mick Wheeler, UK.