Although prices were expected to rise this week, the increase was certainly greater than anticipated thanks largely to the fact that the widely forecast rain for the coffee growing areas in Brazil this week failed to materialise. The second position (December) for arabica closed the week up 10.50 cents/lb at 159.15 cents/lb. Robusta coffee prices followed the arabica market upwards ending the week up $149/ton (6.75 cents/lb) over the week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 75 to 80 toea/kg higher than they were last week.
The dry weather in Brazil, whilst not critical yet, is nevertheless a cause for concern especially as there is now very strong evidence that the El Nino weather phenomenon will dominate weather patterns over the next 6 months bringing further dry spells to Brazil. The dry weather has, however, aided the current harvest and various reports all suggest that the harvest there is now virtually complete. The latest data from CeCafe (the Brazil Coffee Export Association) showed that Brazil exported 3.35 million bags of green coffee in August, a third more than that which was exported last August. Arabica exports totalled 2.65 million bags, while Conillon (robusta) exports amounted to 698,856 bags. However, in the first 8 months of 2023 Brazilian exports are down almost 11% at 20.34 million bags. Furthermore, Vietnamese Government customs data shows that Vietnam’s exports of coffee totalled 20 million bags for the first eight months of the 2023 calendar year. This is 5.4% lower than for the same period last year. Colombia’s FNC has reported that coffee production in August fell to 872,000 bags, 8% lower than in August last year and 75,000 bags lower than in July this 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 have been mixed with Brazilian 3/4’s steady at minus 13; similarly, Honduras HG’s, are also steady at plus 12; Kenya AB FAQ’s, however appear higher at between plus 60 and plus 75; while Colombian UGQ’s are lower at plus 26. Without any update on PNG Y1’s, I would guess that they are steady at around plus 2, but as I cannot keep stressing enough this remains just a guess. Therefore, had an exporter fixed on Friday in New York for November/ December delivery he may have been able to secure a price between 155.35 cents/lb and 162.50 cents/lb.
Although it was anticipated that prices might rise this week, the size of the increase was certainly greater than expected. Dry weather is now forecast for all of next week and whilst this may not be a problem should rain fall thereafter, the longer-range forecasts paint a mixed picture. Good rains are forecast for the week after next for many robusta areas and some arabica growing areas, but the forecasts suggest that there will be a distinct lack of rain in Minas and other important arabica growing areas. So, a mixed picture which will have analysts scratching their heads. The outlook therefore remains positive but the increase in exports from Brazil in August suggests that things are not too tight supply-wise, and this will certainly temper any increase. Whilst much will depend on the weather forecasts, there is a good chance that prices could finish the week higher but probably not by much.
Source:
Mick Wheeler, UK.