A strange week consisting of two distinct halves. New York was closed on Monday but rose strongly on Tuesday and Wednesday, gaining almost 8 cents/lb however it was unable to maintain the upward momentum and lost most of the gains it had made on Thursday and Friday as the funds and speculators cashed in their profits. Despite this arabica coffee prices managed to finish the week higher than they were at the start, gaining 1.95 cents/lb over the week, with the second position closing at 187.70 cents/lb. The robusta market followed New York upwards at the start of the week and although it came under pressure later in the week, did not fall as heavily and thus made a bigger gain adding $79/ton (3.55 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 10 and 15 toea/kg higher than what they were last week.
It was reported that some Brazilian farmers are concerned that the heavy rain seen in some areas of Brazil is causing a number of problems such as knocking off immature fruit as well as increasing the incidence of coffee leaf rust. It has to be said that these concerns do seem to be somewhat isolated and at this stage do not appear to be widespread, but it is clearly something that will need to be monitored. A number of coffee companies issued their financial reports for 2022 this week with all reporting good solid growth in coffee sales and in particular with sales of coffee pods. Nestle reported that sales in coffee grew at a high single-digit rate across all their brands and geographies, supported by a strong recovery of the out-of-home sector. Sales of Starbucks products grew by 12.9% over what they achieved pre-pandemic in 2018. JDE Peets reported a 16.4% increase in their sales for 2022, while Keurig Dr Pepper reported an 11% rise in net total sales of coffee. A new report published this week by Technavio suggests that the global market for coffee pods and capsules will grow by USD 9.5 billion from 2022 to 2027 with Europe accounting Europe 45% of the market’s growth.
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 stabilised this week with Brazilian 3/4’s continuing to be quoted at plus 7, Honduras HG’s are steady at plus 30; as are Kenya AB FAQ’s at between plus 70 and plus 100; Colombian UGQ’s remain at plus 55. Without any update on PNG Y1’s, I would guess that given they might be steady at plus 8, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price between 193.90 cents/lb and 198.00 cents/lb.
Profit taking at the end of the week is of concern as it may signal a more profound change in overall sentiment. But in a way, this should have been expected as we have seen now almost 3 weeks of continuous upward movement and it is inevitable that at some point there would be some sort of correction. The big question however is whether these new levels represent a new equilibrium or whether the market is just pausing before heading off in a new direction. On balance, there does appear a reasonably good chance that the market might stabilize at these new levels next week, with prices remaining very close to where they are now.