Despite significant volatility, it was another good week for the arabica market as more reports are published which suggest that last year’s Brazilian crop was smaller than had been estimated and that next year’s crop, although larger than this year’s, will also be well below its full potential. However, the increase was probably tempered by the fact that the US dollar gained value over the week while the currencies of many of the main coffee producing countries weakened. Even so, arabica coffee prices gained 11.10 cents/lb over the week, with the second position closing at 185.75 cents/lb. Activity on the robusta market was more muted than on New York but still managed to finish the week up, gaining $58/ton (2.65 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 80 and 85 toea/kg higher than what they were last week.
StoneX, an American based trading house, issued its forecast of Brazilian output this week putting the 2022/23 crop at 59.8 million bags up around 1.5% from its previous estimate of 58.9 million bags. Robusta coffee output was raised from 20.6 million bags to 21.5 million bags, while arabica production estimate was kept at 38.3 million bags. For 2023/24, Brazilian coffee production was estimated at 62.3 million bags, an increase of 4.3%. Arabica coffee output was forecast at 40.7 million bags, an increase of 6.4%, while robusta was put at 21.6 million bags, an increase of 0.6%. The latest data from the Green Coffee Association of America (GCA), showed that coffee stocks in warehouses in all ports of the United States totalled 6,264,956 at the end of January. This is 112,895 bags (1.77%) lower than the total at the end of of December 2022, but 469,115 bags higher than in January 2022. This is probably roughly in line with market expectations. Demand for robusta coffee continues to be quite strong probably because of the estimated 10% fall in the upcoming Vietnamese crop. Robusta stocks certified against London have fallen by around 520,000 bags since October and are now at an 8 year low.
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. Brazilian 3/4’s continue to lose ground this week falling around 3 cents/lb to be quoted at plus 7, Honduras HG’s are also lower at plus 30; But Kenya AB FAQ’s are slightly higher at between plus 70 and plus 100; while Colombian UGQ’s are lower at plus 55. Without any update on PNG Y1’s, I would guess that given they might be lower, but some offer lists are putting them higher, so I will adjust my guess according and suggest that they might be around at plus 8. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price between 184.50 cents/lb and 189.20 cents/lb. New York will be closed on Monday for President’s Day plus Brazil will be enjoying Carnival throughout the week, consequently there is a good chance that market activity will be curtailed a bit next week. The increase in prices seen this week is certainly encouraging but profit taking by speculators may well make a dent in that increase earlier on in the week. Nevertheless, it is clear that the upcoming supply/demand balance will be a lot tighter than many were expecting and this should keep prices from falling too far. The outlook remains mixed but the market should hold on to the gains it made this week and may even go higher.
Mick Wheeler, UK.