It had looked as though it would be a very good week on both markets, despite there not being any significant fresh fundamental news, but a sudden and dramatic turnaround on Friday in reaction to what many saw as disappointing GCA data completely altered the picture. Nevertheless, both markets finished the week higher with arabica coffee prices gaining 2.05 cents/lb while robusta prices gained $17/ton (0.77 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 around 15 to 20 toea/kg higher than what they were last week.

The GCA stock figures released on Thursday evening showed that coffee stocks in warehouses in all ports of the United States totalled 5,679,162 bags at the end of March. This is 1.9% or 111,409 bags lower than at the end of February and 5.7% or 344,406 bags lower than in March 2020. The reaction of the market to what on the face of it looks like positive news is somewhat surprising especially as the five-year average variation for March is for stocks to have fallen by an average of 69,963 bags. However, the market was expecting a much bigger fall and thus it reacted negatively. The latest data from the Brazil Coffee Export Association (CeCafe) showed that Brazil exported 3 million bags of green coffee in March, down 2.7% from the 3.2 million bags exported during the same month last year. Arabica exports totalled 2.7 million bags, down 6.3% from the 2.9 million bags exported in March 2020. Robusta exports totalled 351,735 bags, up 38.7% from the 253,550 bags exported in the same month last year. A new report published by Fitch Solutions forecasts that global coffee consumption will increase, from an estimated 161.2 million bags in 2020 to 175.0 million bags by 2025. They anticipate that growth will be slower in the next 5 years than it was over the last 5 years growing on average by 1.7% rather than the 3.0% seen over the period from 2015 to 2019. They attribute this to decelerating growth in most developed markets with consumption in some markets (such as Japan) already starting to decline. They believe that consumption in emerging markets will be the key driver of any growth.

I still cannot get access to any reliable regularly-published data on coffee price differentials, so once again I have had to use sources, the accuracy of which cannot be guaranteed. These other sources suggest that physical price differentials have contracted a bit this week. Brazilian 3 /4’s, appear to be lower at around minus 22; Honduras HG’s, also appear to be lower at plus 20; Kenya AB FAQ’s are slightly lower at plus 100/110; Colombian UGQ’s maybe slightly lower at plus 51; but PNG Y1’s appear to be unmoved at plus 8, although largely unquoted at this time of the year. If an exporter had fixed a price on Friday for July/August delivery, he should have secured a price somewhere between 138.80 and 143.45 cents/lb.

The reaction to the data from the GCA was, on the face of it, disproportionate, although given the escalation in prices over the previous 4 days, the fall may have also reflected profit taking by many speculators. Rather earlier than normal, market commentators are beginning to refocus their attention on the upcoming Brazilian winter. This may have something to do with various long range weather forecasts which suggest that this may be a harsher than normal winter, but it is still exceptionally early and so far, neither market appears to be taking any notice. The outlook for the more immediate term remains positive but any increase will probably remain modest.