A difficult week to summarise in that prices fell on Monday, rose on Tuesday, fell on both Wednesday and Thursday but recovered strongly on Friday. The recovery on Friday appears to in response to negative news about the crops in Costa Rica and Vietnam, but it may well have been in response to the fact that the market was looking decidedly oversold. Anyway, arabica coffee prices gained 5.45 cents/lb with the second position (July 24) closing at 206.60 cents/lb. Movements in the robusta market were more muted but mirrored the direction that arabica took and finished the week gaining US$78/ton (3.50 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 40 and 45 toea/kg higher than what they were last week.
The latest data from the Brazil’s CeCafe show that Brazil exported 3.9 million bags of green coffee in April, up 61% from the 2.4 million bags exported in April last year. Arabica exports totalled 3.2 million bags, while robusta exports amounted to 676,691 bags. The USDA continued to publish some of its attaché reports this week, estimating that the crop in Guatemala would total 3.25 million bags in 2024/25, in El Salvador the crop is forecast at 560,000 bags, in Costa Rica at 1.185 million bags and in Mexico at 3.89 million bags. All of these forecasts are generally in line with market expectations and not too dissimilar from the crops these countries produced last year, although some analysts are pointing at the estimate for Costa Rica suggesting that this is on the low side and is being cited as the reason the market rose on Friday. However, this looks unlikely. Of greater interest is the forecast produced by some Banks and Trade Houses this week which put the Brazilian crop at around 69 million bags and the Vietnamese crop at around 27 million bags. It was announced this week that the Government of Uganda is committed to register all coffee farmers and have a National Traceability System in place so as to comply with the European Union Regulations on deforestation-free products (EUDR). The scheme will be introduced in a phased manner but the Government has committed to providing just over $9 million in 2024/25 to the scheme with the promise of further funds next year.
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 continue to be stable with Brazilian 3/4’s steady at minus 14; Honduras HG’s remain at plus 7; Similarly Kenya AB FAQ’s are unmoved at between plus 40 and plus 55; while Colombian UGQ’s continue to be steady at plus 14. Without any regular updates on PNG Y1’s I can only guess that they might also be steady at around plus 3. Therefore, had an exporter fixed on Friday in New York for September/October delivery he may have been able to secure a price somewhere between 200.90 cents/lb and 210.15 cents/lb.
The surge on Friday is certainly encouraging but it is difficult to know whether this was down to a changing fundamental outlook or just a technical reaction to the price developments throughout the week. Speculators have been reducing their exposure to coffee, but still remain net long. Furthermore, certified stocks continue to increase and the export figures coming out of Brazil suggest that there is no real shortage of coffee at the moment. So the outlook is rather mixed, consequently while prices will probably continue to be volatile, I would not be surprised to see prices finish the week a little bit lower than what they are now.
Source:
Mick Wheeler, UK.