Another very volatile week on both markets. New York started off strongly but meandered downwards mid-week trying to assess a bearish forecast from Volcafe only to bounce strongly on Friday on concerns about supply in the immediate short term. Arabica coffee prices finished the week gaining 7.60 cents/lb with the second position (May 24) closing at 189.45 cents/lb. The London robusta coffee market was slightly less volatile but continued its upward march gaining $141/ton (6.40 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 50 and 55 toea/kg higher than they were last week.
Sucden Financial estimated this week that 2023/24 global coffee production for the 2023/24 coffee year amounted to 165.49 million bags, with demand estimated at 168 million bags, leaving a supply deficit of 2.51 million bags. Brazil’s production was put at 66 million bags, with 45 million bags of arabica and 21 million bags of robusta. Vietnam’s output was estimated at 29 million bags. Whilst the company made no firm predictions for 2024/25 they did say that they thought it was possible that Brazil might produce a crop of over 70 million bags. Volcafe on the other hand has forecast that Brazil’s 2024/25 coffee crop will be 68.2 million bags, 0.7% higher than they estimated that Brazil produced in 2023/24 and 10 million bags higher than the CONAB estimate. Arabica output is put at 45.4 million bags while robusta is estimated at 22.8 million bags. They suggest that there will be a global surplus of 2.1 million bags in 2024/25. However, while Brazilian growers are reporting good foliage growth they are also reporting that the trees are carrying very few cherries. 85% of the coffee submitted for grading against the New York market failed this week. The reasons for this are not clear. It may be to do with the quality of coffee submitted but is more likely to be as a result of the new ruling that the exchange will not allow the resubmission of old certified coffee stocks.
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 steadied a bit this week and remain relatively firm. Brazilian 3/4’s remain at minus 11; Honduras HG’s however are slightly higher at plus 8; Kenya AB FAQ’s are steady at between plus 60 and plus 75; as are Colombian UGQ’s at plus 12. So, without any update on PNG Y1’s, I would guess that they might also be steady at around minus 2/3. Therefore, had an exporter fixed on Friday in New York for May delivery he may have been able to secure a price somewhere between 180.50 cents/lb and 187.90 cents/lb.
With widespread forest fires in Colombia threatening a number of coffee plantations there, the continued trouble in the Red Sea, the lack of origin selling together with the depletion of certified stocks have all combined to raise concerns about the availability of coffee for immediate delivery. Trade House forecasts of better supplies later this year have certainly muddied the water, but there is, undeniably, greater upward pressure than there is downward, This suggests that both markets will continue to be very volatile next week as the prospect of immediate shortages battles with the possibility of better supplies in the future. Difficult to know how this will play out over the week, but there seems to be a very good chance that prices might finish the week slightly higher, or at best very close to where they are now.
Source:
Mick Wheeler, UK.