Concern about the erratic nature of the rain falling in Brazil and forecasts of further dry weather for at least the next 2 weeks prompted a huge rally in prices this week. Both markets rose every day this week bar Friday when there was a small correction. Arabica coffee prices gained 18.25 cents/lb over the week, with the second position (March 25) closing at 266.90 cents/lb. Robusta prices increased by US$350/ton (15.85 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 115 and 120 toea/kg higher than they were last week.
There is now real concern that the rain seen just over a week ago will have prompted a widespread flowering but without any follow-up rain the trees will abort the blooms leading to serious crop losses. There is rain in the forecast but nothing significant for at least the next two weeks and even then, well below the seasonal average. Brazilian meteorologist Somar reported that Minas Gerais, the largest coffee region in Brazil accounting for 30% of its arabica production, only received 9.8mm rain the week before last, which is just 62% the historical average. The NCA’s 2024 autumn National Coffee Data Trends study found that most American drink coffee at home with 81% of past-day coffee drinkers having coffee at home, compared to 36% of past-day coffee drinkers having coffee out-of-home. However, at-home and out-of-home coffee consumption are not mutually exclusive as many coffee drinkers will have consumed coffee in multiple locations. The report also found that 51% of Americans believe coffee is good for their health. 66% believe coffee improves mental focus, and 46% believe it improves physical endurance. Drip coffee makers have long been the most popular preparation method (36%) for past-day coffee drinkers, with single-cup brewers remaining in second place (24%). Ready-to-drink remains in third place (18%) and continues to grow in popularity, with past-day consumption more than doubling since 2023.
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 weakened a bit, but the situation is mixed. Brazilian 3/4’s remain at minus 17; but Honduras HG’s are slightly lower at plus 10; Kenya AB FAQ’s, continue to be quoted at between plus 35 and plus 50; while Colombian UGQ’s are also slightly lower at plus 11. So, my best guess for PNG Y1’s is that they are probably steady at around minus 7. Thus, had an exporter fixed on Friday in New York for December delivery he may have been able to secure a price somewhere between 255.35 cents/lb and 263.35 cents/lb.
This week’s increase shows how tight the supply/demand balance for next year appears. Both Vietnam and Brazil are already suffering weather related impacts on the size of their crops next year and it must be noted that there is still a long way to go before the next harvest in both countries begins and there is no certainty that things will be plain sailing from here on in. However, the fact that there is now rainfall forecast for most areas in Brazil albeit in 2 weeks’ time suggests that speculators may pause a bit and start taking their profits. Indeed, Friday’s fall could easily be put down to that. The outlook therefore remains uncertain, prices could just as easily continue to rise as they could to fall. On balance I suspect that we may see a pause with prices ending the week very close to where they are now.
Source:
Mick Wheeler, UK.