Weekly Market Report – 18 July 2021

The threat of cold weather hitting many coffee growing areas in Brazil over the next 3 days forced coffee prices sharply up this week. As a result, arabica coffee prices gained 9.85 cents/lb over the week while robusta coffee prices gained just $23 (1.05 cents/lb) reflecting the fact that supplies of robusta are unlikely to be threatened. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be between 70 and 75 toea/kg higher than what they were last week.

The weather forecasts suggest that a high-pressure system, bringing with it very low temperatures, will move through the south of Minas Gerais and the state of Parana on Monday morning and remain there until Tuesday or Wednesday. At the moment no frost is predicted but the temperatures are predicted to fall to a minimum below 5 degrees and in some areas as low as 1 degree. It should also be pointed out that there is very limited rain in the forecast which again although typical for this time of the year does little to quell any fears about the size of next year’s crop. The markets also received some support earlier in the week from strengthening of the Brazilian Real. The market rise may also have reflected the data released by the Green Coffee Association (GCA), which showed that coffee stocks in warehouses in all ports of the United States totalled 5,779,461 bags for the month ending June 30. This is 0.6% or 35,678 bags lower than last month and 18% lower than was recorded in June 2020. Typically, stock levels in America in June rise with the average increase over the last 5 years being 114,703 bags so the fall is significant and shows that demand is stronger than many previously thought. Although the robusta market may not have been affected by the frost scare, prices remain high on news that Vietnamese customs data for June showed a third consecutive decline in monthly shipment volumes, with just 2.1 million bags shipped last month, bringing the total for the year so far to 19.29 million bags. This is 11.9% lower than the total at the same time last year and the lowest cumulative volume shipped since the 2014/15 season.

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. Once again physical price differentials appear to have been relatively stable this week. Brazilian 3 /4’s, remain at minus 23/24; Honduras HG’s appear steady at plus 25; as are Kenya AB FAQ’s at plus 110/120; Similarly Colombian UGQ’s remain at plus 58; while PNG Y1’s also seem to be unmoved at plus 9. If an exporter had fixed a price on Friday for September /October delivery, he should have secured a price somewhere between 166.55 and 170.95 cents/lb.

Looking at the detailed weather forecast for coffee growing areas in Brazil suggests that some areas might well experience a light frost next week, but much will depend on the extent of any damage. The chances are that it will be light, but there is certainly the potential for more significant damage if the temperatures fall lower than predicted for longer than anticipated. Consequently, the outlook is uncertain, and indeed anything might happen. However, given past experience and the fact that none of the forecasts suggest that the temperatures will in fact dip below freezing there is a reasonable chance that prices may well end the week lower than what they are now.

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