As anticipated arabica coffee prices came under a bit of pressure throughout the first half of the week only to bounce back up again as a result of a bout of speculative buying on Thursday. It did not last though, as arabica coffee prices lost ground on Friday, but despite this, arabica coffee prices finished the week slightly higher, gaining 1.05 cents/lb with the second position (July 24) closing at 184.00 cents/lb. Robusta coffee prices, on the other hand fared much better buoyed by fears of lower output in both Vietnam and Indonesia combined rising demand. They finished the week gaining $147/ton (6.70 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be very close to what they were last week.
The latest report from Australia’s Bureau of Meteorology notes that although the El Niño weather phenomenon continues, it is near its end, with climate models indicating that sea surface temperatures in the central tropical Pacific are expected to return to neutral during the last quarter of 2024. Some models suggest that the return to a neutral state might happen sooner, but all agree that the El Nino will continue to weaken over the next few months. This will be welcome news to growers in many origins who have either seen long spells of dry weather or in some cases excessive rain. It had been anticipated that the weather phenomenon would have brought dry weather to Brazil over the last 4 months or so, but it did not and indeed Brazil appears to have enjoyed excellent growing conditions as a result. ECOM forecast this week that Brazil’s upcoming 2024/25 coffee crop will be around 70.5 million bags, with arabica output totalling 47.5 million bags and robusta 23 million bags. This is certainly higher than all the official sources and higher than some private sector forecasts although there have been some estimates that are much larger than this.
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 appear to have strengthened a bit this week with Brazilian 3/4’s higher at minus 12; similarly Honduras HG’s are higher at plus 6; Kenya AB FAQ’s appear to be more steady at between plus 45 and plus 70; while Colombian UGQ’s are also higher at plus 16. So, without any update on PNG Y1’s, I can only guess that they might also be slightly higher at around minus 2. Therefore, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price somewhere between 181.60 cents/lb and 184.95 cents/lb.
The volume of arabica coffee stocks certified against the New York exchange continues to increase, rising by almost 80,000 bags over the week to total 568,627 bags by close of business on Friday. Whilst this was anticipated the increase is slightly more than many expected and indeed there are still a further 85,000 pending grading so next week will inevitably see a further increase. Both markets will be closed on Friday for the Easter break but that should not have any real impact on price development this week. There is continuing good news on the macro-economic front with financial institutions in many developed markets suggesting that growth will be better than many had feared. The outlook however remains mixed and without any change in the fundamentals, there is every chance that prices will continue to meander, ending the week very close to where they are now.
Source:
Mick Wheeler, UK.