Weekly Market Report 29th October 2023

A disappointing week, despite a good start with prices rising on both Monday and Tuesday, but thereafter profit taking following over 2 weeks of steadily increasing prices forced the market down during the second half of the week. It could have been worse but arabica coffee prices ended the week down 3.90 cents/lb with the second position (March 24) closing at 160.50 cents/lb.  The robusta market followed New York downwards with the slump reflecting higher than anticipated origin selling which encouraged further selling by speculators. Robusta coffee prices ended the week $96/ton (4.35 cents/lb) lower.  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 30 and 35 toea/kg lower than they were last week.

Rain continues to fall in Brazil and although in places slightly lower than the average, is still considered to be beneficial for the development of the new crop.  It will be an “on” year in Brazil’s biennial cycle so there is a good chance of a record high crop, although the threat of the El Nino may still have an impact on the final total.  The NCA released it latest finding from the National Coffee Data Trends Report, which found that 63% of American adults drank coffee in the past day – more than any other beverage, including tap or bottled water.  It also found that U.S. consumers spent nearly $110 billion on coffee and related goods in 2022, with coffee accounting for more than 8% of the value of the entire food service industry in America and supports more than 2.2 million U.S. jobs.    The Coca-Cola Company reported its third quarter 2023 results this week, highlighting that its revenues from coffee grew 6%, thanks largely to the strong performance of Costa Coffee in the United Kingdom and China. Keurig Dr Pepper also reported its results for the third quarter this week indicating that its operating profit in the US has come under pressure, reflecting a small decrease in its sales of coffee pods, but that its international performance has more than offset any national decline. 

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.  The rise in futures prices has eventually taken its toll on physical price differentials this week, but the situation is mixed.  Brazilian 3/4’s remain at minus 13; but Honduras HG’s, are lower at plus 10; Kenya AB FAQ’s, however continue at between plus 60 and plus 75; while Colombian UGQ’s are much lower at plus 20.  Without any update on PNG Y1’s, I would guess that they might also be lower and trading at around plus 1/2, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 160.80 cents/lb and 163.65 cents/lb.

It was probably inevitable that speculators would eventually cash in on their profits especially as the continued good rain in Brazil gave them every reason to do so.  Further light rain is forecast for most coffee growing areas over the week to come.  The fact that growers in Brazil are beginning to get more active in the market is a sure sign that they are feeling more confident about next year’s crop.  However, the decline seen this week although significant needs to be compared to the almost 20 cents/lb increase seen over the two and a half weeks prior to the retreat.  This suggests that there remains serious concern about future supplies, especially in the near term.  Thus, while prices may well come under further pressure this week, there is a good chance that they will probably stay close to where they are now.                                                                                                                               

Source:
Mick Wheeler, UK.