A slightly lower forecast for the upcoming Brazilian harvest from CONAB together with concerns about the robusta crop in Vietnam forced prices higher this week although the path upwards was far from smooth. Arabica coffee prices ended the week up 8.45 cents/lb, with the second position for arabica (September) closing at 189.30 cents/lb. There appears to be clear evidence of a squeeze on the robusta market with the spot position (May) trading at a premium of $135/ton. The squeeze has been obviously helped by concerns about the crop in Vietnam which has pushed all other positions higher. Over the week robusta prices gained $156/ton (7.10 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 65 to 70 toea/kg higher than they were last week.
CONAB, the official Brazilian food agency, released its second survey of the 2023/24 crop estimating total output at 54.74 million bags, down from the 54.94 million bags it estimated in January. Arabica production is forecast at 37.9 million bags, while the robusta crop is put at 16.8 million bags. Interestingly the survey suggests that the amount of land under coffee in Brazil totals 1.87 million hectares, an increase of 1.7% over the area estimated for the previous harvest. The USDA has started to publish its attaché reports for a number of producing countries this week. Guatemala’s 2023/24 coffee crop is forecast to shrink 3% to 3.43 million bags; India’s crop is also seen lower at 5.8 million bags with the arabica crop at 1.23 million bags, down 7% and robusta at 4.58 million bags, down 11%; Peru’s coffee crop however is forecast at 4.2 million bags, up 16%; Colombian coffee production is forecast at 11.6 million bags up 2.7% on last year’s output; Kenya’s output is forecast to increase 6.7% to 800,000 bags; while Uganda’s coffee production is predicted to reach a record high of 6.85 million bags; but Indonesia’s crop is estimated at 9.7 million bags, down 18% due to heavy rain that is said to have disrupted the cherry development stage in major producing areas.
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 under pressure this week with Brazilian 3/4’s losing another 2 cents to be quoted at minus 9, Honduras HG’s are steady at plus 18; as are Kenya AB FAQ’s at between plus 45 and plus 70; but Colombian UGQ’s are lower at plus 42. PNG Y1’s, are reported to be firm but I have no figures, so can only guess that they may be steady at around plus 8. Therefore, had an exporter fixed on Friday in New York for Aug/Sept delivery he may have been able to secure a price between 191.85 cents/lb and 199.55 cents/lb. This week’s rise was unexpected but the picture being painted by the various forecasts suggests that things will continue to be tight during the year ahead. The shortage of coffee coming out of Vietnam is clearly of concern to many market players but has been commented on for a number of weeks now so should not have been that much of a surprise. There are no frosts predicted for Brazil over the next 2 weeks and the weather there looks dry which will help the harvest. Consequently, the outlook is slightly mixed which means that both markets will remain very volatile. Prices certainly have the potential to go higher, especially robusta prices, but arabica prices will probably remain close to where they are now.
Mick Wheeler, UK.