A very volatile week with prices seesawing up then down but finishing the week on a negative note. Much of the activity was related to currency movements although a small but significant increase in the open long position which will need to be sold sometime soon created the negative tone on which the week ended. Arabica coffee prices ended the week losing 5.90 cents/lb, with the second position closing at 185.95 cents/lb. The robusta market started the week mirroring the arabica market but ended the week on a more positive note gaining $27/ton (1.20 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will be about 45 to 50 toea/kg lower than they were last week.
Rain has continued to fall throughout most of Brazil’s coffee belt, which could potentially cause some delays to the 2023/24 harvest. Early Robusta harvesting has already begun in some areas, but the main arabica harvest will only start in early June although could easily be delayed if the wet weather continues. Indeed, a very close eye will now be kept on Brazil’s winter weather as there is always a chance of a frost, although the El Nino normally brings with it a reduced risk of really low temperatures, but it could also mean heavier than normal rainfall, which could impact the new crop. Mr. German Bahamon has been elected unanimously by the 15 coffee committees as the new manager of the FNC. Mr. Bahamon has worked in coffee for a long time and is said to have great management skills. His appointment has been welcomed by the coffee community, although not by the Colombian President, Gustavo Petro, who favoured another candidate for the position. This suggests that further conflict might ensue. A number of coffee companies reported their results for the first quarter of 2023 with Nestle reporting that their coffee division saw “high single-digit growth”, with positive sales developments for Nescafé, Starbucks and Nespresso. Tata Global Beverages reported a 48% increase in their sales of Starbucks products while Keurig Dr Pepper reported that net sales for the first quarter of 2023 increased 8.9% to $3.35 billion.
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 come under pressure this week with Brazilian 3/4’s losing 3 cents/lb to be quoted at minus 4, Honduras HG’s have also fallen but not by as much losing a cent to be quoted at plus 20; Kenya AB FAQ’s remain unchanged at between plus 40 and plus 65; while Colombian UGQ’s are also lower and are be quoted at plus 45. For PNG Y1’s, I can only guess that they too will have lost ground to probably around plus 9. Therefore, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price between 193.80 cents/lb and 197.40 cents/lb.
The market clearly sent mixed signals this week, rising strongly on Monday and Wednesday only to fall back on the other three days of the week. The weather in Brazil is not unusual for this time of the year but the heavy rain is making market participants nervous. The forecast for the next 2 weeks shows the rain easing but not stopping. Temperatures are unlikely to cause any concerns over the next 2 weeks but thereafter even though there is an El Nino, will be the focus of many market participants’ attention. The outlook remains uncertain and as a result the market will remain volatile, but prices could easily improve a bit next week.
Source:
Mick Wheeler, UK.