Concern about the weather in Brazil and its’ impact on the upcoming harvest forced prices up this week, although it was not all plain sailing as both markets were very volatile. Arabica prices fell sharply on Wednesday, but rapidly recovered on Thursday ending the week gaining 4.80 cents/lb, with the second position (May 25) closing at 324.60 cents/lb. The robusta market was equally volatile, despite the fact that the harvest is well under way in Vietnam and growers there are eager to sell before the Tet holidays. Over the week robusta prices rose by $40/ton (1.80 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 65 and 70 toea/kg higher than they were last week.
The increases seen this week may also have reflected the buying activity of the large funds who usually rebalance their portfolios at this time of the year. As highlighted last week it is clear that the funds are increasing their exposure to all soft commodities and the volatility seen this week may well have been a consequence of that. The Brazilian Institute of Geography and Statistics (IBGE) released their latest forecast for Brazil’s 2025/26 coffee crop this week, which they anticipate will total 53.2 million bags, down 6.8% year from their estimate for the latest harvest. Arabica coffee production is put at 35.6 million bags, down 11.2% from last year’s estimate while conillon output is forecast at 17.6 million bags, up 3.4% on the volume produced in 2024. CeCafe released their latest export data for Brazil this week showing that Brazil exported 3.4 million bags of green coffee in December, down 10.5% from the 3.8 million bags exported during the same month last year. Arabica exports totalled 2.8 million bags, while conillon (robusta) exports totalled 562,978bags. It has been estimated that Colombia’s FNC lost over $200 million from hedging positions on the New York exchange which cooperatives in the country failed to honour. Under the scheme cooperatives were allowed to hedge via the FNC but as prices rose the cooperative reneged on their obligations leaving the FNC with the massive losses.
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. There appears to have been very little movement in physical price differentials this week. Brazilian 3/4’s are slightly higher at minus 15; but Honduras HG’s are steady at plus 6; as are Kenya AB FAQ’s, at between plus 30 and plus 40; Colombian UGQ’s are also unmoved at plus7. PNG Y1’s therefore, will probably be steady at around minus 10. Thus, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price somewhere between 312.30 cents/lb and 318.50 cents/lb. This week’s increase is encouraging, although the volatility must be of concern as it suggests that many market players think prices should be lower. The forecast from Brazil’s IBGE seemed to be in line with early expectations for the crop but over the next few weeks we will see numerous forecasts being produced by a host of actors which might end up painting a different picture. So a degree of caution is required as it can be anticipated that the market will react each time a new forecast is produced. The outlook is therefore for continued volatility but it would not be surprising to see prices end the week slightly higher.
Source:
Mick Wheeler, UK.