Weekly Market Report 26th March 2023

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Weekly Market Report 26th March 2023

As anticipated it was another volatile week with prices on the arabica market fluctuating widely from day to day.  No real reason for this other than market participants remain unsure what the upcoming crop in Brazil will be.  Arabica coffee prices managed to finish the week 1.70 cents/lb higher, but it could have gone either way, with the second position closing at 178.30 cents/lb.  The robusta market on the other hand made ground every day of the week reflecting concern that the continuing fall in exports from Vietnam reflect something more serious.  Over the week robusta coffee prices gained $125/ton (5.65 cents/lb).  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea in the week to come, will probably be about 10 to 15 toea/kg higher than they were last week.

Part of the volatility seen this week in the arabica market might have reflected the macro-economic picture rather than fundamentals.  At the start of the week, all markets reflected the nervousness felt about the possible Credit Suisse insolvency, although news of its take over by UBS certainly calmed nerves all round.  And later in the week there was some speculation over whether the Federal Reserve and the Bank of England would raise interest rates and more importantly by how much.  The quarter percent increase in interest rates was widely predicted so did not cause any real reaction in unrelated markets.  The election of the shortlisted candidates to head the Colombian coffee growers federation (FNC) had an unexpected outcome as 10 of the 15 coffee committees abstained from voting, after the Finance Minister opposed the candidate who probably was the front-runner, Felipe Robayo.  It is not clear how the Government will react to this snub or whether the candidate finally chosen will be able to lead effectively.  According to the latest British Coffee Association research that was conducted was just prior to COVID, in-home coffee consumption accounts for just over half of the UK market, with workplace coffee consumption making up around 30% of the market and high street retail around 20%.  Also, more recent research suggests that since the pandemic overall consumption has remained strong.

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 largely unchanged this week with Brazilian 3/4’s continuing to be quoted at level, Honduras HG’s are steady at plus 28; as are Kenya AB FAQ’s at between plus 90 and plus 110; but Colombian UGQ’s maybe slightly lower at plus 55.  Again without seeing any new quotes for PNG Y1’s, I can only guess that they remain at plus 15.  Consequently, had an exporter fixed on Friday in New York for June/July delivery he may have been able to secure a price between 186.85 cents/lb and 193.80 cents/lb.

Certified stocks fell significantly this week although the total still remains much higher than it was a few months ago but not as high as it was a year ago.  This suggest that roasters still see the exchange as an attractive place to buy coffee and certainly cheaper than buying direct from origin.  The rise in robusta prices seen this week is interesting especially as the Brazilian conillon crop will probably start in a couple of weeks’ time.  Both factors however, suggest that there is a degree of tightness in the physical market, which should help support both markets throughout the week.  However there will be volatility which means that prices could go either way but there is a reasonable chance that they may finish slightly higher.                                                                                                                                                  

Source:
Mick Wheeler, UK.

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