27 May Market Report – MARCH 2024
Market rally takes a coffee break”
After last week’s rally, Arabica consolidated lower this week as certified stocks built. Robusta followed suit, but to a lesser extent, with cash differentials – particularly in Asia – stubbornly high. The new year began with the same impetus as last year ended, with continued volatility.
In Asia, Robusta differentials remain exorbitant on scarce supplies – the only way to ration demand is by raising prices. Indonesian robusta differentials soared ~$100 on last week as the industry awaits the peak harvest period.
Coffee Prices Fall on Projected Surplus for 2024-25 – May arabica coffee today is down -1.15 (-0.63%), and ICE robusta coffee is down -4 (-0.12%). Coffee prices are lower today after Rabobank predicted a coffee surplus of 4.5 million bags for the upcoming 2024-25 marketing year, up sharply from the 500,000 bag surplus projected for 2023-24. Coffee prices were undercut by last week’s rain in Brazil. Somar Meteorologia reported Monday that Brazil’s Minas Gerais region received 45.7 mm of rainfall in the past week, or 107% of the historical average. Minas Gerais accounts for about 30% of Brazil’s Arabica crop
Regions
Brazil:
Local industry remains buying hand-to-mouth with better volume trading as the market rallied at the start of the week. Shipments continue strong although largely for Robusta, as February arabica green bean shipments, as reported by Cecafe were below expectations, reflecting congestion at the port of Santos and continued rollover of shipments into the following month which may see Arabica shipments in March increasing.
Colombia:
Another quiet week, little business took place, and the industry awaits the arrival of the “mitaca” crop to flow. The Union of Colombia Coffee farmers, a movement that includes 11 different Provinces, protested in front of the FNC’s HQ. They announced they would go on strike on April 28 if no agreement is made. The farmers union argues they have been losing money growing coffee and are looking to negotiate for stable coffee prices, higher taxes on coffee imports, and the change in the purchase yield for parchment that was modified around 6 months ago.
Honduras:
Mainstream business remains lack lustre. More inquiries are coming for the lower-grade qualities. Internal prices are still too high to trigger business.
Tanzania:
An auction was held in Moshi this week, and offered 5,000 bags of freshly stored coffee, predominantly FAQ grade. We expect only 80% of the coffee will be sold, with prices rallying due to increased demand from a few buyers. This trend set a tone for higher reserve prices. The next auction is scheduled to be in Moshi but to be determined when. The port congestion remains a significant challenge, with approximately 20 vessels currently anchored at the outer anchorage, awaiting to berth. Moreover, vessels are now only open for two days, exacerbating the issue as queues are getting bigger.
India:
Indian coffee exporters fear Robusta price rally could lead to flight of customers to other origins – Business Line – Indian coffee exporters fear that the current surge in Robusta prices could lead to flight of customers to other cheaper origins in Africa and Asia. Global prices of Robusta’s are at a three-decade high on weather induced supply issues in top producer Vietnam. The Indian Robusta’s are expensive over other origins as they command a significant premium over the terminal prices in London. Premiums for the Indian Robusta’s Parchment AB are currently hovering around $700-750 per tonne over the London terminal prices.
PNG:
A slight improvement in flow of both parchment and cherry, this week in the Western Highlands. Other neighbouring provinces are yet to see the new crop arrivals. The local prices are on the rise because of the delayed crop and exporters chasing any coffee available in the market.
Vietnam:
Upcountry prices shrugged off the collapse in robusta futures from the highs and continued to trade above 92,000 VND/kg causing another 50-100 USD leap in replacement differentials with exporters covering shorts. G2 is trading around K + 600/+650 FOB in bulk. Industry demand is notably weaker at these premiums as forward buying decisions are put on hold where it is harder to find offers and mainly immediate needs are covered where there is slightly better liquidity.