Weekly Market Report – 20th October 2024

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Weekly Market Report – 20th October 2024

A bit of a roller-coaster ride this week with both markets bouncing strongly higher on Monday only to give half of the gains back on Tuesday. Prices meander a bit over the next three days, but arabica coffee prices managed to finish the week gaining 5.25 cents/lb, with the second position (March 25) closing at 256.00 cents/lb.  Robusta prices on the other hand, although moving in line with the ups and downs of arabica, did not manage to finish the week higher and in fact lost $63/ton (2.85 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 between 45 and 50 toea/kg higher than they were last week.

The differential between arabica and robusta coffee prices appears to be widening a bit after narrowing significantly over the past 9 months.  This is thought to have been in reaction to the exceptionally high prices we have seen for robusta since the start of the year, which inevitably has encouraged roasters to substitute lower quality arabica for the higher priced robusta.  On Friday the differential stood at 49 cents/lb yet at the start of the month it was around 30 cents/lb.  The European Council this week agreed to the European Commission’s proposal to delay the implementation of the EUDR by 12 months.  The delay still requires the European Parliament to agree but the aim is to have the revised regulation formally adopted by both co-legislators and published in the Official Journal of the EU by the end of the year.  The average price of roast and ground coffee in America reached $6.47/lb in September according to the latest US government statistics.  This is 6.3% higher than in September last year and the highest price seen since the Government began recording coffee prices in January 1980.  Nestle has reported their nine-month sales for 2024 this week showing that coffee was the largest growth contributor to this, thanks to their three leading coffee brands, Nescafé, Starbucks and Nespresso.

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 movements this week have been mixed with no real discernible trend. Brazilian 3/4’s are still quoted at minus 17; but Honduras HG’s are higher at plus 12; Kenya AB FAQ’s, are much lower at between plus 25 and plus 40; while Colombian UGQ’s are higher at plus 14.  So, my best guess for PNG Y1’s is that they are probably about the same at around minus 7.  Thus, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 244.75 cents/lb and 250.75 cents/lb.  

The weather forecasts suggest heavy rainfall in Brazil over the next two weeks but turning drier at the start of November.  That is still some way off and the forecasts can certainly change during that time.  Nevertheless, the markets will be encouraged to see the rain, which might not entirely repair the damage done earlier in the year but will improve the outlook.  The crop in Vietnam however still looks as though it will be significantly lower, but it is raining as normal there now so things might start to improve.   This week’s price movement is encouraging in that it clearly demonstrates that most market players expect the supply shortage to be significant next year but the more it rains in both Vietnam and Brazil the greater the pressure on prices.  I expect prices to finish the week lower but not by much.                                                                                                                                                               

Source:
Mick Wheeler, UK.

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