Overall it was a relatively quiet week with both markets waiting for further developments before deciding where to go next. Arabica coffee prices made a small jump upwards on Wednesday in response to suggestions that the upcoming crop in Brazil may not be as large as some analysts are anticipating, but apart from that daily movements were really small compared to the sort of volatility seen recently. Over the week arabica coffee prices gained 3.20 cents/lb, with the second position closing the week at 155.75 cents/lb. The robusta market was also quiet probably reflecting the lack of activity in the run up to the Tet holiday this weekend and gained $28/ton (1.25 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 25 toea/kg higher than what they were last week.
As anticipated the latest GCA coffee stocks figures showed a small decline of 12,573 bags in December to total 6,377,851 bags, however this is still 544,159 bags (9.3%) higher than in December 2021. The latest data from the Brazil Coffee Export Association (CeCafe) showed that Brazil exported 2.9 million bags of green coffee in December, down 16.6% from the 3.4 million bags exported during the same month last year. Arabica exports totalled 2.8 million bags, down 14.6% , while robusta exports totalled 55,490 bags, plummeting 61.3% from the 143,443 60-kg bags exported in the same month last year. 2022 calendar year exports totalled 35.6 million bags, a 2.6% decline from the same period last year. Brazil’s CONAB, estimated this week that the country’s 2023/24 coffee crop will be 54.94 million bags, an increase of 7.9% compared to last year’s crop which they estimated amounted to 50.9 million bags. They estimated that the total area under coffee in the country is 2.26 million hectares, an increase of 0.8% over the area of the previous harvest, with 1.9 million hectares in production and 355,500 hectares in development. In their latest report, Volcafe has forecast that 2022/23 global coffee output will be 167 million bags, comprising 87 million bags of arabica and 80 million bags of robusta. Demand is put at 171.6 million bags, leaving a global supply deficit of 4.5 million bags.
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. Brazilian 3/4’s continue to harden gaining almost 10 cents/lb over the week to plus 12; Honduras HG’s are steady at plus 38; as are Kenya AB FAQ’s at between plus 65 and plus 90; Colombian UGQ’s are also steady at plus 61. Without any update on PNG Y1’s, I would guess that they might also be steady or possibly higher but without any confirmation I guess they remain at plus 4. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price between 156.85 cents/lb and 160.20 cents/lb.
The massive jump in Brazilian differentials seen this week paints a completely different picture to what market movements suggest. Brazilian farmers know that the upcoming crop will not be as large as some trade houses would have everyone believe and are holding back waiting for better prices. However, it is not uncommon for there to be a serious disconnect between the physical market and the futures market which can take time to eventually be reconciled. Nevertheless, the outlook is not as bearish as it was and I would expect to see further modest gains in prices this week.Â
Source:
Mick Wheeler, UK.