Arabica coffee prices had a much better week than expected although the situation remains fragile. There remains a degree of wariness about next year’s figures which is adding more support than has been evident of late. Over the week arabica coffee prices gained 7.00 cents/lb with the second position closing at 171.60 cents/lb. Robusta prices although volatile ended the week just $9/ton (0.40 cents/lb) higher but the suspicion that someone is trying to squeeze the January position remains with the spot position gaining $27/ton over the week to widen the premium over the March position to $84/ton. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 50 and 55 toea/kg higher than what they were last week.
This week’s increase although not unexpected was certainly larger than anticipated and may have been due to the fact that the US dollar lost value after Japan’s Central Bank raised its interest rates earlier in the week, while at the same time the Brazilian Real remained strong. The USDA published its bi-annual coffee report this week, but as it has been releasing various attaché reports over the last few weeks, the overall totals did not cause significant surprise. Global production was increased by 6.6 million bags to 172.8 million bags, while world consumption was adjusted upwards by 800,000 bags to 167.9 million bags, showing a surplus of 4.9 million bags for the 2022/23 coffee year. World coffee exports are forecast to be 3.0 million bags lower at 116.1 million bags. Brazil’s arabica output is forecast to rebound by 3.4 million bags to 39.8 million.. They forecast the Brazilian robusta harvest to continue expanding to reach a record 22.8 million bags, up 1.1 million bags. Vietnam production is forecast at 30.2 million bags, down 1.4 million from last year’s record harvest due to reduced yields. Colombia’s production is forecast up 800,000 bags to 12.6 million bags while Indonesia production is forecast to rise nearly 800,000 bags to 11.4 million, with robusta output reaching 10.0 million bags and arabica 1.4 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. Physical price differentials appear to have remained steady this week but some sources suggest that there has been some positive upward movement. According to my sources Brazilian 3/4’s continue at around at minus 7; Honduras HG’s are steady at plus 37; Kenya AB FAQ’s are also steady at between at plus 65 and plus 90; as are Colombian UGQ’s at plus 60. Without any update on PNG Y1’s, I would guess (and it is just a guess) that they might also be steady at around plus 3 /4, although some sources suggest they are higher, but give no figures. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price between 168.25 cents/lb and 173.00 cents/lb.
Christmas is always strange time as many traders are absent from the market, given that next week New York will be closed on Monday and London closed on both Monday and Tuesday. However, this week’s rise suggests that sentiment may be beginning to become slightly more bullish than of late, which could mean that prices might continue on their upward trajectory as the market awaits further estimates of next year’s Brazilian crop. The figures released so far are a mixed bag which really have not been that helpful. The outlook is therefore positive but, given that trading volumes maybe rather thin next week, prices could well be volatile.
Source:
Mick Wheeler, UK.