Weekly Market Report 25th June 2023

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Weekly Market Report 25th June 2023

It was a brutal week for arabica coffee prices last week, despite the fact that the New York market was only open for four days.  Two influential reports were published last week, one from the USDA and another from Miami-based Stone X, both of which predicted a larger than anticipated surplus for next year.  As a result Arabica coffee prices lost 18.10 cents/lb with the second position for arabica closing the week at 164.85, the lowest it has been for 6 months. Robusta coffee prices weathered the storm much better primarily as a result of Vietnam not selling into the rout and managed to finish the week losing just $81/ton (3.65 cents/lb).  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 125 and 130 toea/kg lower than what they were last week.

Despite the fact that that the USDA have been releasing data on their estimates of production for the major producing countries over the last 4 to 5 weeks, it appears that the market expected them to be more optimistic about consumption than they were.  World coffee production for 2023/24 is forecast 4.3 million bags higher than their estimate for last year at 174.3 million. Brazil and Vietnam are both forecast to have bigger crops which the USDA believe will more than offset the reduced production they foresee for Indonesia. They put global exports 5.8 million bags higher at a record 122.2 million, primarily on strong shipments from Brazil. Global consumption is forecast at a record 170.2 million bags, but stocks in consuming countries are expected to remain tight at 31.8 million bags.  Stone X are a little more cautious on their production forecasts putting 2023/24 global production at 171 to 173 million bags, an increase of 0.6% to 1.8%.  They are however far more pessimistic about consumption putting global demand in 2023/24 at between 163.17 and 164.17 million bags, suggesting a far bigger surplus of between 7.8 and 8.8 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, as always, the situation is mixed.  Brazilian 3/4’s are unmoved at minus 14; as are Honduras HG’s at plus 17; Kenya AB FAQ’s are still quoted at between plus 45 and plus 70; but Colombian UGQ’s are lower at around plus 42.  Without any update on PNG Y1’s, I would guess that they might be lower around plus 5, but I need to emphasise that 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 169.05 cents/lb and 174.95 cents/lb. The weather in Brazil continues to be relatively good, the temperature in some areas is forecast to go lower but at the moment no frosts are predicted.  There is no doubt that this week’s fall was brutal but the speed and size of the fall was unexpected and possibly overdone.  There is therefore a small chance that there may be a bounce sometime over the week to come and I would not be surprised to see prices recover a bit but equally there is also the chance that rout will continue and prices will fall further. So it could easily go either way. 

Mick Wheeler, UK.

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