Weekly Market Report - 16th November 2014 Concern over the irregular response to the rain that is falling in Brazil fuelled a surge in coffee prices this week with reports that different plantations even in the same region are reacting differently. Pictures showed coffee in excellent condition on one side of the road while on the other side the coffee trees look extremely stressed and in very poor condition. As a result arabica coffee prices jumped 8.6 cents/lb while robusta coffee prices gained $54/ton (2.5 cents/lb). While the rains that have fallen in Brazil over the last few weeks have been reasonably good, although late, it appears this is still far from what could be considered a normal start to the spring rainy season in Brazil. The temperatures at night time are reportedly still colder than usual and it appears that the crucial Amazon Flow is not yet in place. Seasonal rainfall, which for coffee in Brazil usually starts mid/end-September, comes from the moisture or rain moving southward from the Amazon River Basin. Many agronomists attribute this slow start to be due to climate change and rising ocean temperatures in the Pacific that appear to have delayed the Amazon Flow this year. At Sintercafe this week, Judy Gains predicted that there will be a significant shortage of coffee next year which world stocks will be insufficient to cover. She pointed to the fact that although the absolute numbers appear to show that there will be enough coffee to satisfy demand, she highlighted the fact that the market has failed to acknowledge that the bulk of the stocks represent working stocks i.e. coffee that is needed to keep the pipeline flowing and thus is not truly available. According to the latest data from Brazil-based Safras e Mercado, 61% of the 2014-2015 Brazil coffee crop has been sold by the end of last week, higher than the 49% that was sold by the same time last year and above the 56% five-year average. Brazilian producers sold 29.75 million bags out of the estimated 48.9 million bags, according to the report. It was also noted that there was a slowdown in coffee sales in the second half of October. The Coffee Board of India has set a target of producing 400,000 tons of coffee in the next 5-10 years, representing a 31% increase. The growth in production will be a direct result of an expansion program which will offer significant subsidies to growers wishing to replant and rehabilitate their coffee as well as encourage expansion of the coffee areas throughout the country. Traders report that the physical market was very quiet this week with most of the focus on spot coffees. Price differentials are weaker, but the situation is mixed. Brazilian 3 /4’s are down 4 cents at minus 32; Honduras HG’s are also down 2 cents to level; Kenya ABs FAQ’s, against the trend, are significantly higher at plus 60/70; Colombian UGQ’s however, are down a cent at plus 6; PNG Y1’s are not widely quoted but where quoted are around minus 7. Rain is forecast the Zona de Mata region of Brazil next week but other coffee growing areas look set for a dry spell. This may spook the market, but because rain fell all last week many traders will assume that the dry spell will have very little impact. Nevertheless market participants will, almost certainly, remain jittery and this should effectively place a fairly solid floor preventing prices from falling significantly, although if the weather forecast changes then anything could happen. At the moment it looks like prices should remain firm and may even rise over the week. By Mick Wheeler United Kingdom
Posted on: Mon, 17 Nov 2014 06:24:45 +0000
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