At long last the market turned upwards, rebounding relatively strongly despite the New York market being closed on Thursday for Thanksgiving. Over the week arabica coffee prices gained 9.95 cents/lb while robusta, which has certainly fared better over the last few weeks than arabica, gained just $10/ton (0.45 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 70 and 75 toea/kg higher than what they were last week
Whilst it is difficult to pinpoint what caused the turnaround, the release of some the USDA’s attaché reports this week may have been seen as positive. For Brazil the attaché has revised downward the estimate for 2022/23 (July/June) coffee production to 62.6 million bags, 1.7 million bags lower than the estimate made in June. However, the estimate is still up by 4.5 million bags compared to the last year’s harvest. Arabica production has been revised downward to 39.8 million bags, down 1.7 million bags compared to their earlier estimate, while their estimate for robusta output remains unchanged at 22.8 million bags. Their estimate for domestic coffee consumption remains unchanged at 22.45 million bags (21.5 million bags of roast/ground and 950,000 bags of soluble coffee), up just 1% on last year’s estimate. The USDA have maintained their previous estimate for Indonesia coffee production at 11.35 million bags, but have lowered their estimate of domestic coffee consumption down by 30,000 bags to 4.77 million bags. For Vietnam the USDA attaché has lower its estimate of 2022/23 coffee production down to 30.22 million bags with consumption at 3.3 million bags. Colombia’s output is put at 12.6 million bags a decrease of 3.1% on their earlier estimate, domestic consumption remains unchanged at 2.2million 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. Once again movements in physical price differentials have been mixed, but most appear to be steady or higher. Brazilian 3/4’s are steady at minus 9; but, Honduras HG’s are slightly higher at plus 39; Kenya AB FAQ’s also appear higher at between at plus 75 and plus 100; Colombian UGQ’s appear unmoved at plus 65. Without any update on PNG Y1’s, I would guess (and it is just a guess) that they might also be slightly higher at around plus 4/5. Therefore, had an exporter fixed on Friday in New York for March/April delivery he may have been able to secure a price between 166.40 cents/lb and 171.05 cents/lb.
Although this week’s increase is a welcome relief from the relentless charge downwards we seen over the last few weeks, it would be premature to think that the bounce will continue and that further falls are out of the question. Yes the turnaround is encouraging and recent coffee company quarterly financial returns suggest that consumption remains relatively strong, despite earlier warnings that consumption is waning, but there are a number of danger signs which suggest that all is not well. Certified stock levels continue to rise with the failure rate at around 20% being much less than many were originally speculating. Global inflation continues to remain high and further increases in interest rates look certain. China is going through another bout of lockdowns. So the outlook remains precarious and whilst it looks fairly certain that prices should continue to rise this week, the longer term outlook is not so certain.
Source:
Mick Wheeler, UK.