The arabica coffee market continues to surprise with another exceptionally strong move upwards this week, which probably caught many by surprise. Some sort of continuation of the bounce seen last week was widely anticipated but the size of the jump seen this week was certainly unexpected. Arabica coffee prices gained 27.35 cents/lb over the week, with the second position (July) closing at 399.85 cents/lb. This is higher than the values seen just before the tariff induced sell off. Robusta coffee prices also had a good week, gaining $138/ton over the week. (6.25 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 210 and 215 toea/kg higher than they were last week.
It is difficult to really pinpoint what was the catalyst for this week’s hike but the lack of rainfall over the previous weekend together with downwardly revised forecasts for rain for the next two weeks probably were significant factors. Adding to the upward pressure seen this week was the notable weakening of the US dollar. The dollar is experiencing broad-based losses against practically all currencies including against the Brazilian real. Furthermore, Rabobank forecast this week that Brazil’s arabica output for the 2025/26 season will fall by around 13.6% year-on-year from their estimate for last year’s output to 38.1 million bags. They cite the lingering effects of last year’s El Niño which they believe continues to be a factor. On the other hand, they see robusta production reaching a record high of 24.7 million bags, up 7.3% year-on-year. Overall output is put at 62.8 million bags which although considerably higher than the CONAB forecast, is on the low side compared to other private sector forecasts. It was interesting to note that in Brazil, consumers appear to be turning to instant coffee as prices increase. According to data from the Brazilian Association of the Soluble Coffee Industry (ABICS), the country’s population consumed 5,600 tons of soluble coffee in the first quarter of 2025, up 6.2% compared to the same period in 2024.
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. With the rapid rise in futures seen over the last two weeks it is no surprise that physical price differentials weakened a bit this week, Brazilian 3/4’s are lower at minus 14; Honduras HG’s are quoted at plus 3, but Kenya AB FAQ’s, are steady at between plus 20 and plus 25; and Colombian UGQ’s are also steady at plus 5. I can only assume, therefore, that PNG Y1’s are probably slightly lower at around minus 4, but, as always, this is just a guess. Thus, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price somewhere between 391.80 cents/lb and 406.50 cents/lb. The surge in prices seen over the last couple of weeks clearly reflects concerns over the basic fundamentals of the coffee industry i.e. future supply and demand, rather than concerns about external factors. Those concerns have not gone away, and the tariffs imposed on imports into America continue with most coffee origins facing a 10% tariff. So, the big question remains as to how American consumers will react to the continuing rise in retail prices. The market however appears to be seeing that as a long-term problem that it can worry about later and is clearly more concerned about short term shortages. The immediate outlook therefore remains exceptionally difficult to predict but further price increases cannot be ruled out just yet.
Source:
Mick Wheeler, UK.