A stronger dollar, particularly against Latin American currencies, together with the prospect of beneficial rains hitting most coffee growing areas of Brazil next week forced prices sharply down this week. Most of the damage was done on Monday although there was a small recovery on Friday but nowhere near enough to restore the losses seen throughout the rest of the week. Arabica coffee prices finished the week down 7.70 cents/lb with the second position (December) for arabica closing the week at 150.00. Robusta coffee prices followed New York downwards pressured by news that Brazilian conillon exports were up significantly in July. As a result, robusta prices lost $155/ton (7.00 cents/lb) over the week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 60 to 65 toea/kg lower than they were last week.
Colombia’s president Gustavo Petro appears to be making further waves this week, first with his calls on the FNC to restructure and also with his call for the free-trade agreement with America to be revised. The President’s relationship with the FNC can best be described as strained and stems from the time that he tried to prevent the current incumbent from becoming the head of the FNC. This week he threatened to withhold the Government’s contribution to the Coffee Fund unless the FNC is restructured and in particular that the current head of the FNC resigns. The Coffee Fund finances Cenicafe (the research arm of the FNC) as well as the scheme that ensures that farmers always have a buyer for their coffee no matter their location at market prices based on international coffee prices. This argument looks set to continue. He also is insisting on revising rather than renegotiating the free trade agreement with America which he thinks is one-sided, but his strategy runs the risk of seeing tariffs imposed by America on imported Colombian coffee. In other news the local weather agency in Indonesia, BMKG, has issued a seasonal update on the adverse weather that been impacting the country, which looks like it will have impacted coffee output there negatively.
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 been relatively stable this week with Brazilian 3/4’s unchanged at minus 15; Honduras HG’s, remain at plus 11; Kenya AB FAQ’s, are also steady at between plus 45 and plus 70; but Colombian UGQ’s are lower at plus 28. Without any update on PNG Y1’s, I would guess that they might also be slightly lower at around level. Therefore, had an exporter fixed on Friday in New York for November/December delivery he may have been able to secure a price between 147.2.00 cents/lb and 151.75 cents/lb. The ongoing slide in coffee prices seen this week is a matter of some concern, but the bounce, albeit relatively small, seen on Friday does suggest that maybe the market is oversold at the moment and that things might settle down next week. The only problem being that Brazilian warehouses are bulging at the moment with unsold coffee from the current harvest which to date is still not complete. Estimates suggest that 80% of the arabica crop has been picked while 98% of the robusta crop has been harvested. The outlook is therefore precarious but there is every reason to suppose that prices should not go that much lower and that there is a good chance they might actually appreciate a bit over the week to come.
Source:
Mick Wheeler, UK