Overall, it was a relatively quiet week with prices mainly trading sideways and not really making or losing any ground until Friday when speculation over interest rates in the USA pushed all commodity prices higher. Both coffee markets followed suit with arabica coffee prices gaining 3.20 cents/lb over the week with the second position (December 24) closing at 247.30 cents/lb, while robusta prices were up US$35/ton (1.60 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 20 and 25 toea/kg higher than they were last week.
A new Reuters poll, which averaged various predictions by market analysts suggests that the 23/24 coffee year will produce a surplus of around 700,000 bags and that this will fall to 150,000 bags next year (2024/25). It has to be said, however, that the range of next year’s forecasts was particularly wide so this average is probably a bit misleading. Nevertheless, they also reported that the average of these forecasts suggests that the 2024/25 Brazilian coffee crop will be around 68.10 million bags, increasing to 70.75 million bags next year. However, some real caution is required here as it is still very early to be making such predictions given that harvesting for the current crop has only just concluded and so far there has been no widespread flowering. Both Brazil and Colombia announced this week that they are establishing on-line help for their exporters to manage the upcoming introduction of the EUDR. In the case of Brazil Cecafe has just launched a new web site which aims to facilitate the understanding of the new rules and their implications for the coffee trade in Brazil. While in the case of Colombia, the FNC is aiming to launch a new online platform for exporters and growers to have access to georeferencing within the next 2 weeks.
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. Once again, physical price differentials appear to be relatively unchanged this week, with Brazilian 3/4’s continuing to be quoted at minus 15; Honduras HG’s, remain at plus 10; likewise, Kenya AB FAQ’s, remain at between plus 35 and plus 50; while Colombian UGQ’s are unmoved at plus 14. So, my best guess for PNG Y1’s (and it is only a guess) is that they are probably still at around minus 6. Thus, had an exporter fixed on Friday in New York for December delivery he may have been able to secure a price somewhere between 234.55 cents/lb and 241.70 cents/lb.
The latest Commitment of Traders Report (August 20th) indicates that the funds and speculators increased their long positions by 5,428 lots to 55,404 lots, but also increased their short positions by 914 lots to 11,106 total lots, thereby increasing their overall their net long position by 4,514 lots. This is certainly bullish and suggests that they continue to expect prices to improve. Certainly, their confidence last week paid dividends. However, much of last week’s movement was down to currency and interest rates speculation so it is not easy to share their optimism, although the Reuters poll suggests that analysts overall see a much tighter supply/demand balance than some of the major trade houses are suggesting. The outlook therefore remains mixed, although there is very little rain in the weather forecasts for Brazil which suggest that there is little chance of an early flowering. So, my best guess is that prices will end next week very close to where they are now or maybe slightly higher.
Source:
Mick Wheeler, UK.