As anticipated the week started off on a negative note but what was not anticipated though was the strong recovery seen during the second half of the week when prices made up more than they had lost. Arabica coffee prices finished the week up 1.05 cents/lb with the September position for arabica closing the week at 161.85. Robusta coffee prices also had a good week gaining $62/ton (2.75 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 5 and 10 toea/kg higher than they were last week.
Reports suggest that the harvest in Brazil is progressing well thanks to very favourable weather in Brazil. It appears that the robusta or conillon harvest is virtually complete while Cooxupe, a large Brazilian coffee cooperative reported this week that the arabica harvest is now more than 50% completed, reinforcing the claims that the pace of the harvest is more advanced than last year. Similar reports from Safras e Mercado, a Brazilian consultancy, suggest that the harvest overall is 66% complete. There were some reports which suggested that in some areas of Brazil there had been rain which if heavy would delay the harvest but other reports suggest that the rain was inconsequential and unlikely to cause any real problems. However, reports from Colombia suggest that the mid-crop or mitaca was lower than expected with production over the first six months of the calendar year amounting to 4.1 million bags down from the 5.4 million bags produced over the same period last year. The fall in production has been attributed to excess rainfall over the last year although Colombia has witnessed higher than average rainfall for a number of years now. However Cenicafe reported this week that rainfall fell sharply across the majority of coffee-producing regions in June and is expected to decline further in July. This is believed to be as a result of the transition to the El Niño, which is expected to see the amount of rain in Colombia fall by between 20% and 60%. This does not auger well for the crop there.
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 do not appear to have changed very much this week with Brazilian 3/4’s unchanged at minus 15; Similarly, Honduras HG’s are unmoved at plus 15; Kenya AB FAQ’s, remain at between plus 45 and plus 70; Colombian UGQ’s are also steady at around plus 35. Without any update on PNG Y1’s, I would guess that they might also be steady around plus 3, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for Sept/Oct delivery he may have been able to secure a price between 159.75 cents/lb and 164.80 cents/lb. The strength seen in the market later in the week was certainly unexpected and has been attributed by some to the reluctance by Brazilian growers to sell into a falling market believing that prices will go higher. That might be wishful thinking but certified arabica stocks continue to fall and whilst there is a chance that some of the new crop Brazilian coffee will find its way onto the exchange it will only do so if there is no other ready home for it. The outlook is therefore mixed and whilst the negative overtones persist, there is a good chance that prices may stay very close to where they are.
Source:
Mick Wheeler, UK.