Weekly Market Report 28th May 2023

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Weekly Market Report 28th May 2023

A stronger US dollar together with a series of optimistic country forecasts from the USDA combined to push arabica prices lower this week, wiping out all of last week’s gains. Arabica coffee prices ended the week down 9.75 cents/lb, with the second position for arabica (September) closing at 179.55 cents/lb. Robusta coffee prices fared much better as fears that continuing high inflation will push consumers into drinking lower quality blends which contain more robusta, kept prices stable ending the week just $2/ton (0.10cents/lb) lower. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 75 to 80 toea/kg lower than they were last week.

Revised figures out of Germany showed that Europe’s largest economy had fallen into recession prompting concern and a degree of nervousness across all commodity market but principally energy. Arabica coffee prices appear to have reacted more negatively than robusta but that appears to be due to the interpretation that consumers will be prepared to see a greater inclusion of robusta in their blends as they try to economise. Although there are still a large number of USDA attaché reports to be released before the main report is released in late June, those that have been released so far suggest an increase in global production for the major producers year on year. Brazil’s is yet to be released but Vietnamese output is projected at 31.3 million bags up a million bags on last year’s estimate. It should be noted however that while the market has reacted negatively to these reports, the USDA are notorious in always being on the high side with their production estimates, but to be fair other agencies are just as bad. The market is however desperately awaiting the USDA’s estimate for Brazil which has the capacity to determine whether prices come under serious pressure in the weeks ahead or whether they will remain roughly where they are now. The European Coffee Federation (ECF) has released their data for coffee stocks in the ports of Antwerp, Hamburg, Le Havre, Barcelona, Trieste, Genoa, Napoli, Tallin, London, Felixstowe, and Bremen which show that in April, total coffee stocks totalled 671,390 tons (11.2 million bags), a 10.1% fall year on year but a 1.1% increase month on month.

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 are largely unmoved this week but as always, the situation is mixed. Brazilian 3/4’s are steady at minus 9, as are Honduras HG’s at plus 18; Kenya AB FAQ’s remain at between plus 45 and plus 70; but Colombian UGQ’s are lower at plus 39. I have no figures for PNG Y1’s, so can only guess that they may too be steady at around plus 8. Therefore, had an exporter fixed on Friday in New York for Aug/Sept delivery he may have been able to secure a price between 186.26 cents/lb and 190.40 cents/lb.

The volatility seen especially in the arabica market over the last few weeks, with prices see-sawing from one week to the next, demonstrates the uncertainty that most market traders feel at the moment. The USDA figures, whilst always questionable, do suggest that things might not be as bad as some believe and if the remaining reports all show a more optimistic outlook then arabica coffee prices under pressure. The fact that the market did not react too negatively to the Vietnam report suggests that robusta prices will fare better. The outlook therefore suggests that arabica prices might go the week lower, while robusta stays the same.

Mick Wheeler, UK.

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