Weekly Market Report 19th November 2023

As expected, it was another volatile week on both markets, with dry and very hot weather in Brazil pushing prices higher, but the looming First Notice Day, poor US economic data and the forecast of rain for early next week combined to push back in the opposite direction.  By the end of the week, despite reaching levels not seen since last June, arabica prices were down 4.00 cents/lb with the second position (March 24) closing at 166.55 cents/lb.  Robusta coffee prices once again moved in concert with arabica but concern about adverse weather in Indonesia and a smaller crop in Vietnam kept them more buoyant, finishing the week up $100/ton (4.50 cents/lb).  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 30 and 35 toea/kg lower than they were last week.

The number of Americans filing for unemployment benefits rose by 13,000 to 231,000 over the week to reach the highest level in nearly three months with market analysts fearing that this will have an impact on the demand for coffee.  Temperatures in the coffee growing regions of Brazil reached over 40 degrees this week prompting concern that this might damage the upcoming crop.  Indeed, had this heat wave continued it most probably would have, but the weather forecast for the week ahead is one of widespread rain, although the next couple days are going to be dry.  Also, there is more rain predicted for the arabica areas, than for the robusta areas, although many robusta farms in Brazil use irrigation so this drier spell should not be a problem unless the continues to be dry.  The latest data from the Brazil Coffee Export Association (CeCafe) shows that Brazil exported 4.0 million bags of green coffee in October, some 24.5% more than was exported during the same month last year.   Arabica exports accounted for 3.4 million bags, up 8% while robusta exports totalled 662,051 60-kg bags, almost 5 times the amount exported last October.  However overall Brazil’s exports for the first 10 months of the calendar year only total 27.5 million bags, down 8%, with all of this decline attributable to the falling arabica exports. 

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.  Despite the volatility seen in the futures markets, physical price differentials have remained relatively stable this week.  Brazilian 3/4’s are a cent higher at minus 14; Honduras HG’s are steady at plus 6; similarly Kenya AB FAQ’s continue at between plus 60 and plus 75; Colombian UGQ’s continue to be quoted at plus 16.  Without any update on PNG Y1’s, I would guess that they might also be steady at around minus 2, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for March delivery he may have been able to secure a price somewhere between 163.65 cents/lb and 170.00 cents/lb. The outlook depends very much this week on whether the rain forecast for Brazil appears or not.  Weather forecasts are much better than they used to be but as we have seen earlier this year, they are not always entirely accurate.  Certified arabica stocks on the New York exchange continue to fall although the rate of decline is slowing down due to delivery of semi-washed arabica coffee from Brazil.   New York will be closed on Thursday for Thanksgiving although this is unlikely to have that much of an impact on prices.   Prices will probably continue to be volatile but should finish the week very close to where are now.    

Source:
Mick Wheeler, UK.