The volatility continues with coffee prices leaping upwards on Monday by over 11 cents/lb on news on continuing dry weather in Brazil and Vietnam, only to spend the rest of the week ebbing downwards. Asa result arabica coffee prices finished the week very close to where they started gaining 1.80 cents/lb, with the second position (September 24) closing at 226.80 cents/lb. On the other hand whilst robusta prices followed a very similar path to arabica, they finished the week down US$93/ton (4.20 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 15 and 20 toea/kg higher than they were last week.
The increase on Monday may have been down to speculation that the cold weather front forecast to hit Brail this week would be colder than it now appears. It will be cold over the next 4 days but the minimum is only expected to get down to 10 degrees. The dry weather is however, very beneficial for the harvest which is moving on apace with reports suggesting that almost 60% of the crop has already been harvested. Certified stocks on the New York market continue to rise as do stocks elsewhere, The All Japan Coffee Association published data on stocks in Japan this week showing that Japanese coffee stocks totalled 2.5 million bags in May, an increase of 0.9% from April and the highest level since February 2023. The Colombian Government has introduced pension reform, which will give coffee growers, who do not have a pension already a monthly pension of around Ps223,000 pesos ($55). However the cost of these reforms will fall on the shoulders of young coffee growers. The latest data from the US Government shows that the average price of coffee in the US reached $5.99/lb in May, the highest seen in 2024., although this is 1.6% lower than the average price of $6.09/lb recorded in May last year.
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. Despite the volatility, physical price differentials are virtually unchanged this week, with Brazilian 3/4’s continuing to be quoted at minus 14; Honduras HG’s appear unmoved at plus 9; as do Kenya AB FAQ’s, at between plus 40 and plus 55; Colombian UGQ’s are also steady at plus 15. I have recently come across some offer lists which suggest that the differential for PNG Y1’s is much lower than I have been reporting. It now looks as though this currently standing at around minus 6. Therefore, had an exporter fixed on Friday in New York for October delivery he may have been able to secure a price somewhere between 216.05 cents/lb and 222.55 cents/lb.
It can be anticipated that the volatility see over the last couple of months will continue for the time being. Although there is a cold spell in Brazil at the moment, the weather forecasters do not predict that temperature s will go much lower anytime soon. There remains some concern about the supply/demand balance but it is interesting to note that stocks in importing countries continue to rise. The outlook for the week ahead is for continued volatility and whilst there is greater potential for downward movement than upwards there is a good chance that prices will remain close to where they are now, albeit slightly lower.
Source:
Mick Wheeler, UK.