As anticipated both markets continued to be volatile throughout the week, but most of the movement was unfortunately downwards. Both markets appear to have been pressured by an increase in the volume of certified stocks against the New York market, something that many anticipate will be exacerbated by the potential arrival of Brazilian coffee in the next few weeks. In addition, a weakening of currencies in producing nations added to the downward momentum. Arabica coffee prices finished the week losing 6.40 cents/lb with the second position (May 24) closing at 180.30 cents/lb. Once again, the London robusta coffee market followed movements in New York, although it may have been the other way around, but either way it ended the week losing $111/ton (5.00 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be around 50 toea/kg lower than what they were last week.
StoneX, a US based commodity trader, released its’ 2024/25 Brazil production estimate this week forecasting the country’s output at 67.0 million bags. Arabica was estimated at 44.3 million bags and robusta at 22.7 million bags. This estimate is significantly higher than the recently released estimate by CONAB, which put the crop at 58 million bags but lower than many other private sector estimates which put the crop at over 70 million bags. StoneX also adjusted their estimate for last year’s Brazilian production for (2023/24), raising it from 62.3 million bags to 64.27 million bags. The volume of stocks certified against the New York market increased this week by 16,889 bags to 324,157 bags a 5.5% increase. JDE, one of the world’s largest roasters reported mixed results this week for 2023. They reported that their profit for 2023 totalled €1.13 billion ($1.22 billion), down 8.1% on a reported basis from last year but up 1.1% organically. They attribute the fall in profits to currency fluctuations as well as to the Russia/Ukraine war. However, they reported that in-home sales increased by 3.3% and away-from-home sales increased by 6.4%. Nestle reported a decrease in total sales in 2023 this week citing unprecedented inflation, but its net profit rose sharply.
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 volatility in the Futures market is, to an extent, reflected in the physical market but so far, the falls over the last 2 weeks falls do not appear to have any effect on physical price differentials, but as always, the situation is mixed. Brazilian 3/4’s are steady at minus 13; as are Honduras HG’s at plus 7; Kenya AB FAQ’s are also unmoved at between plus 60 and plus 80; Colombian UGQ’s continue at plus 15. So, without any update on PNG Y1’s, I can only guess that they might be unchanged at around minus 2/3. Therefore, had an exporter fixed on Friday in New York for May delivery he may have been able to secure a price somewhere between 176.50 cents/lb and 180.80 cents/lb.
The weather forecasts for the coffee growing areas in Brazil suggests that there will be further rain in all areas over the next two weeks. However, the crop forecasts which are now appearing do not paint a picture of the upcoming global supply/demand balance which is too alarming. For the more immediate future both markets having fallen for the last 2 weeks appear oversold, with many origins refusing to sell at these levels. It would not surprise me, therefore, if both markets managed to make some very small gains over the week to come.
Source:
Mick Wheeler, UK.