Weekly Market Report 22nd October 2023

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Weekly Market Report 22nd October 2023

Another unexpectedly good week for both arabica and robusta coffee prices, despite widespread rain throughout the Brazilian coffee growing regions. Both markets however appear preoccupied by the lack of fresh coffees with certified stocks on both markets shrinking to their lowest levels this year. Arabica coffee prices ended the week up 9.25 cents/lb with the second position (March 24) closing at 164.40 cents/lb. The robusta market also had an excellent week, partly following New York upwards but also reflecting increased concern about the low volume of exports from Vietnam, down 8% on last year. Robusta coffee prices ended the week $195/ton (8.85 cents/lb) higher. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 70 and 75 toea/kg higher than they were last week.

Reports suggest that there is a shortage of trucks and containers in Brazil, causing delays in exports. Although still too early, it can be anticipated that the first wave of estimates and forecasts for the next crop in Brazil will begin to circulate in the next few weeks. Most will be stabs in the dark at this early stage but nevertheless they will have an impact on market sentiment. Reports suggest that Brazilian producers are dissatisfied with current coffee prices, resulting in a reluctance to sell either on the domestic market or for export and instead growers appear to prefer to hold on to their coffee, only selling when they need to meet short-term commitments. These reports also suggest that the current season has been characterised by a much lower volume of coffee sold in advance, curtailing the volume of shipments usually made at this time of year. The Colombian FNC suggested this week that coffee production in Colombia this year will be down on the 12 million bags they forecast earlier in the year at around 11.2 million bags. Nestle announced their financial results for the first nine months of 2023 this week, highlighting that their coffee sales saw “high single-digit growth”, with Nespresso seeing growth of over 5% and their sales of Starbuck products also seeing excellent growth.

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. The concern over the lack of immediate availability appears to have kept physical price differentials stable this week. Brazilian 3/4’s however are slightly lower at minus 13; Honduras HG’s, are unmoved at plus 13; Similarly Kenya AB FAQ’s, continue at between plus 60 and plus 75; while Colombian UGQ’s are steady at plus 25. Without any update on PNG Y1’s, I would guess that they might still be trading at around plus 3, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 163.35 cents/lb and 168.25 cents/lb.

The 17 cents/lb price jump seen over the last 2 weeks has taken most market players by surprise, catching out many speculators who were betting on prices falling, given that rain has fallen throughout Brazil’s coffee belt this week, prompting a widespread flowering. The latest Commitment of Traders report suggests that many have scrambled to close out their short positions and in so doing may have added to the rise. Given the fact that there is concern over the availability of fresh coffee, prices should remain firm this week, but the negative overtones persist, so prices will probably remain very close to where they are now.

Mick Wheeler, UK.

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