Arabica coffee prices continued to be very volatile this week despite the fact that the market was only open for 4 days. New Yorks opened on a positive note on Tuesday, lost ground on Wednesday, was calm on Thursday only to shoot up again on Friday. Arabica coffee prices finished the week gaining 4.50 cents/lb with the second position (May 24) closing at 181.85 cents/lb. The London robusta coffee market continued its upward march gaining significant ground almost every day of the week, gaining $189/ton (8.60 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be around 35 toea/kg higher than they were last week.
The incredible rise in robusta coffee prices seen over the last 2 weeks reflects concern about dry weather in Vietnam as well as the delays in shipping caused by the situation in the Red Sea, which is causing shipping from Asia to be rerouted around the Cape of Good Hope. Interestingly the increase in robusta prices by more than $400/ton in the last 2 weeks is forcing users of low quality robusta to seek out alternative sources of low-quality coffee with a result that low quality arabica triage has seen a massive increase in its value. CONAB published their first forecast for Brazil’s 2024/25 coffee crop this week, estimating that total output will be 58.08 million bags, 5.5% higher than last year. Arabica production is estimated at 40.75 million bags, up 4.7%, while robusta production is expected to total 17.33 million bags, up 7.2%. This estimate is seen as being on the low side and certainly the market appeared unimpressed, but it is very close to what IBGE suggested last week, however the market will want to see further estimates before it reacts more definitively. The All-Japan-Coffee Association reported this week that coffee stocks in Japan totalled 149,337 tons in October, down 11.2% from last year but they fell even further in November to 142,323 tons which is 12.3% lower than last year. Tata Starbucks is hoping to open a new store in India every 3 days to reach its ambition of operating 1,000 stores in India by 2028.
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 strengthen with Brazilian 3/4’s now quoted at minus 11; Honduras HG’s are also higher at plus 7; but Kenya AB FAQ’s are steady at between plus 60 and plus 75; as are Colombian UGQ’s at plus 12. So, without any update on PNG Y1’s, I would guess that they might also be slightly higher at around minus 2/3. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price somewhere between 180.75 cents/lb and 184.75 cents/lb.
There can be little doubt that it is the incredible increase in robusta coffee prices seen over the last 2 weeks which is the focus of attention at the moment. New York has shown signs that it does not want to follow suit, but is has inevitably been drawn upwards, almost against its will. It is difficult to know how long this shipping crisis will last but the situation is unlikely to be resolved anytime soon. Even so it seems unlikely that robusta prices will continue to increase at the incredible rate seen over the last 2 weeks and may even start to retreat a bit, although probably not by much. Consequently, while prices may come under further pressure next week, there seems a very good chance they will remain close to where they are now.
Source:
Mick Wheeler, UK.