Home \ Uncategorized \ Weekly Market Report 31 December 2023

Weekly Market Report 31 December 2023

As anticipated both market were very volatile throughout the week. New York started off the shortened week on a positive note climbing every day until Friday when profit taking, plus a huge sell off due to end of year book-squaring together with a forecast of rain every day next week in Brazil forced prices sharply downwards, losing all that it had gained throughout the week and more.  Arabica coffee prices finished the week losing 4.05 cents/lb with the second position (May 24) closing at 186.20 cents/lb.  The London robusta coffee market was only open on the last three days of the week but followed New York’s upward surge only to collapse on Friday.  Nevertheless, robusta coffee prices finished the week marginally higher, gaining $4/ton (0.20 cents/lb) higher.  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.

The initial rise in prices appears to have been in reaction to Friday’s Commitment of Traders’ report which showed that there had been a significant increase in the net long position of the major speculative funds, implying that these funds believe prices will go higher in the future.  A fall in the value of the dollar to its lowest level since July also added to the bullish sentiment as did the rise in crude oil prices in reaction to geopolitical tensions in the Middle East.  Expectations that the US Federal Reserve may lower interest rates in the near future, thereby boosting consumption, may also have helped. However. this appears to have all changed when the weather forecasters predicted that an area of low pressure will approach the south of Brazil bringing heavy rain. They also suggested that this would cause significant rainfall in a number of the main coffee growing states in the more northern areas of Brazil between Dec 31st and January 4th.  This clearly has eased fears about the dry weather affecting next year’s crop and prompted the sell off.

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 been steady this week with Brazilian 3/4’s continuing to be quoted at minus 17; Honduras HG’s remain at plus 4; as do Kenya AB FAQ’s at between plus 60 and plus 75; Similarly Colombian UGQ’s are unmoved at plus 11.  Without any update on PNG Y1’s, I would guess that they might also be steady at around minus 4, although I must stress this remains just a guess. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price somewhere between 180.05 cents/lb and 191.50 cents/lb.

Although there clearly was a massive sell-off on Friday, the outlook does not look as bad as this would suggest.  Trading volumes were relatively thin throughout the week and the week between Christmas and New Year is traditionally one when prices tend to oscillate wildly.   Things may become clearer next week, although there is always a danger that the downward plunge will continue throughout the first half of the week.  Overall, however, nothing has really changed.  Yes, the crop is developing well in Brazil but the dry weather earlier in the year will have had some sort of impact.  Production in other origins is not looking that great with most forecasters only predicting a very small global surplus.  Consequently, I expect to see some volatility next week, but with prices possibly finishing the week slightly higher.         

Source:
Mick Wheeler, UK.

Scroll to Top