As anticipated it was a trelatively slow week with trading volumes exceptionally low on the few days that the markets were open. Arabica coffee prices managed to finish the week slightly higher, gaining 3.35 cents/lb over the week, with the second position closing at 322.65 cents/lb. Robusta prices, however ebbed lower throughout the week losing $49/ton (2.20 cents/lb) over the week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 25 and 25 toea/kg higher than they were last week.
It is difficult to know exactly why robusta prices are coming under pressure while arabica coffee prices are apparently not, but it may have something to do with the fact that robusta certified stocks have increased by almost 10% in the last 10 days or so, while certified arabica stocks have only seen a very small marginal increase over the same period, although remain much higher than they have for well over 2 years. Reports suggest that Costa Rica is experiencing what maybe its heaviest rainy season for over 100 years with the government raising its emergency alert level to Orange (its’ second highest level). The reports indicate that the excessive rainfall has damaged infrastructure with several main roads cut off due to landslides. Such extreme weather coupled with reported lower temperatures will, inevitably, have a significant impact on the current harvest, which started in October and traditionally continues on through to early March. In Guatemala discussions on the new minimum wage are ongoing, with the government proposing a much smaller increase than the unions and associations are hoping for, although it is anticipated that the matter will be resolved relatively quickly once the interested parties get around a table.
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. Furthermore, as a result of the holidays I suspect that none of these sources have been updated as all quotes appear unchanged. So Brazilian 3/4’s are quoted at minus 16; Honduras HG’s at plus 7; Kenya AB FAQ’s, at between plus 30 and plus 40; Colombian UGQ’s at plus 8. So I can only assume that PNG Y1’s will remain, at around minus 9. Thus, had an exporter fixed on Friday in New York for March/April delivery he may have been able to secure a price somewhere between 309.40 cents/lb and 316.50 cents/lb.
Both markets will be closed on New Year’s Day and thus many traders and other industry participants will have taken the opportunity to take some additional holiday, however, I am not convinced that this will necessarily mean a repeat of last week’s low trading volumes. The increase in arabica coffee prices, albeit small, seen over the last two weeks is certainly encouraging, but whether this upward trend will continue is questionable. There are analysts who firmly believe that the New Year will see arabica coffee prices move to new heights, but any such move will be dependant on further bad weather, so remains just speculation. Next week will probably see the return of the sort of volatility we have seen of late, although I am not sure that we will see further increases in prices. Indeed, I expect prices to end the week lower, although with luck not by much.
Source:
Mick Wheeler, UK.