Weekly Market Report – 19th March 2023

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Weekly Market Report – 19th March 2023

Another volatile week, with prices sliding during the first half of the week, recovering strongly on Thursday, only to return to the downward path on Friday. Over the week arabica coffee prices lost 1.20 cents/lb with the second position closing at 176.60 cents/lb.  The robusta market followed a similar path but with less of a bounce on Thursday finishing the week $76/ton (3.45 cents/lb) lower.  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 10 toea kg lower that they were last week.

It is difficult to pinpoint why prices jumped on Thursday but a bigger than expected fall in GCA stocks may have played a part.  On Wednesday evening the Green Coffee Association of America reported that coffee stocks in warehouses in all ports of the United States totalled 6,104,962 bags at the end of February.  This is 159,994bags, or 2.6% lower than in January, but 339,614 bags (5.9%) higher than at the end of February 2022, even so, the market was expecting somewhere in the region of 50,000 bags so this was larger than anticipated.  In a report published this week, Sucden Financial has forecast global production for the 2022/23 crop year at 164.55 million bags, up 5.5% from the 155.99 million bags produced last year.

They expect demand to increase by 1.5% to 169.51, suggesting that will be a supply deficit of 4.96 million bags.  Interestingly they highlighted their view that with the cost-of-living crisis being experienced in many developed economies at the moment that consumers will continue to downgrade to cheaper private brand labels and thus they expect sales for branded pods for coffee machines to fall in favour of compatible retail pods.  They also argued that with the younger generation being the biggest driver of coffee consumption growth over the long term, they expect to see diminishing coffee content in favour of more milk-based sweeter drinks.  Although the ICO has yet to produce a forecast for the current crop year, the Executive Director said in an interview that she expects the deficit to be in the region of just under 3 million bags.

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.  Physical price differentials appear to have come under a bit of pressure this week, but movements have been mixed.  Brazilian 3/4’s fell 3 cents/lb to be quoted at level, Honduras HG’s are slightly lower at plus 28;  But Kenya AB FAQ’s are unmoved at between plus 90 and plus 110; while Colombian UGQ’s are slightly higher at plus 56.  Without seeing any new quotes for PNG Y1’s, I can only guess that they may be stable at around plus 15.  Consequently, had an exporter fixed on Friday in New York for May/June delivery he may have been able to secure a price between 189.90 cents/lb and 197.20 cents/lb.

The outlook remains somewhat hard to predict at the moment as it is still unclear what will happen to the crop in Brazil.  Good rains have fallen in most arabica coffee growing areas of Brazil during the first half of the month however dry weather is forecast for the remainder of the month in these areas.  The conillon areas, however, are faring better with good rain forecast for the whole month, suggesting that the conillon crop will be large.  Even so, there appears to be a growing consensus that there will be a deficit this year which should counteract any real downward pressure.  With luck prices may improve a bit this week.                                                                                                                                                    

Mick Wheeler, UK.

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