Weekly Market Report – 28 March 2021

Coffee prices started the week on a positive note but a weakening Brazilian Real together with speculative selling pushed prices lower on Tuesday and Wednesday. Both markets however recovered most of the lost ground on Thursday and Friday with robusta prices moving into positive territory. Arabica coffee prices ended the week just 0.55 cents/lb lower than they were at the start of the week, while robusta prices gained $12/ton (0.55 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be very close to what they were last week.

A report published this week by agencies of the State of Minas Gerais estimated that Minas Gerais will see a 40.7% (10.3 million bags) reduction in its’ coffee harvest in 2021. Although this relates just to the state of Minas Gerais, it does confirm other reports which suggest that Brazil’s arabica harvest will be significantly lower this year. Heavy rain in Colombia is becoming a cause for concern with the wet weather destroying roads in a number of coffee-growing provinces. The rain, which is linked to the La Niña weather phenomena, is affecting harvesting of the secondary flush which is underway at the moment and early projections suggest that output during the first half of the year might be down by around 7%. There are also concerns that this excess rainfall may well inhibit the flowering which normally occurs at around this time and thus could have an impact on the main harvest later in the year. There is some concern that there may be an increase in coffee rust as a result of this wet weather but much of the country’s coffee tree stock comprises rust resistant varieties, so this should not be a major problem. The Strauss Group (an Israeli company whose activities are mainly coffee related) has reported that the company’s global sales in local currencies grew significantly last year. Total revenue increased by 4.6%, although this was reduced from 5.4% due to negative movements in currencies vis-à-vis the Israeli Shekel.

There continues to be no reliable regularly-published data on coffee price differentials that I have access to, so once again I have had to use sources, the accuracy of which cannot be guaranteed. These other sources suggest that movements in physical price differentials were relatively positive, but mixed, this week. Brazilian 3 /4’s, appear to be higher at around minus 22; Honduras HG’s, appear to be stronger at plus 22; Kenya AB FAQ’s are however relatively stable at plus 105/110; Colombian UGQ’s are slightly higher at plus 51; but PNG Y1’s continue at plus 8. If an exporter had fixed a price on Friday for July/August delivery, he should have secured a price somewhere between 137.00 and 139.55 cents/lb.

The blocking of the Suez Canal this week will almost certainly impact deliveries of coffee to Europe, mainly robusta from Vietnam, but also other origins in Asia. This will have an impact on prices but may have already been factored in, hence the rise in both markets seen on Thursday and Friday, although other factors were also clearly evident. Whilst last week’s price movements were fairly disappointing, they do suggest that there is good underlying support below 130 cents/lb and there is no doubt that roasters are not well covered at the moment, so are buying into the dips. The outlook therefore is for prices to remain rangebound, staying very close to where they are now, although some small upward movement is not out of the question.

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