Despite a strong start to the week, arabica coffee prices spent the rest of the week meandering up and down. The initial rally was in response to falling certified stock volumes, but forecasts of further rain in Brazil weighed heavily on the market. This was partially offset by the downward revision in the USDA’s estimates for some the world’s major producers, but it merely slowed the retreat from the highs reached on Monday. Even so arabica coffee prices finished the week 1.60 cents/lb higher with the second position (March 24) closing at 168.15 cents/lb. The robusta coffee market started the week quietly but did perk up a bit later in the week in response to the USDA’s forecasts for a smaller crop in Vietnam, finishing the week up $24/ton (1.10 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 10 toea/kg higher than they were last week.
The volume of stock certified against the New York market closed the week at 290,734 bags up just over 1,000 bags on the week but this disguises the fact that the bulk of coffee submitted for grading over the week failed to meet the grade. The USDA released a number of its attaché reports this week in advance of its global report which is due to be published in December. Brazil’s 2023/24 harvest was marginally down from 66.4 million bags to 66.3 million bags. But of greater significance was the forecast for Vietnam which put the current crop lower at around 27.2 but also significantly reduced its estimate for the 2023/24 crop, reducing the agency’s initial estimate by 3.8 million bags to 27.5 million bags. This was attributed to unfavourable weather conditions as a result of climate change and El Nino climate patterns. Indonesia’s 2023/24 harvest forecast is unchanged at 9.7 million bags for 2023/24, but this represents an 18% reduction from last year and again this is put down to poor weather. The forecasts for India and Colombia remain unchanged from the estimates made in June at 6.3 million bags and 11.5 million bags respectively.
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 it appears that physical price differentials have remained relatively stable this week. Brazilian 3/4’s are steady at minus 14; as are Honduras HG’s at plus 6; similarly Kenya AB FAQ’s continue to be quoted at between plus 60 and plus 75; while Colombian UGQ’s are unmoved at plus 16. Consequently, but without any update on PNG Y1’s, I would guess that they might also be steady at around minus 2, although I must stress this remains just a guess. Therefore, had an exporter fixed on Friday in New York for March delivery he may have been able to secure a price somewhere between 165.00 cents/lb and 167.00 cents/lb. The weather forecasts suggest that most of Brazil’s coffee growing belt will receive significant downpours of rain over the next 2 weeks. This does not auger well for prices. However, continuing concern over the short-term availability of coffee is providing significant resistance to all attempts to move the market downwards. The outlook therefore remains somewhat unpredictable, but there has been a noticeable lessening of the volatility seen of late and daily movements appear more muted. Thus, in the absence of anything dramatic happening over the week to come, there is every chance that prices will remain relatively stable finishing the week very close to where are now.
Source:
Mick Wheeler, UK.