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Welcome to our April edition of RNY Market Watch! Andrew Blyth & Tom McLaughlin are here to provide you with the latest insight into the rise in coffee prices as of April 2023.
Another month has come and gone and the “C” market continues to keep us on the edge of our seats. As we approach the start of the upcoming Brazil harvest just a few weeks away, the market is showing its desire to climb higher. A number of factors have helped coffee prices skyrocket during the first three weeks of April.
The London Robusta market this week has seen prices trade up to levels last seen 16 months ago. The primary cause is related to a shift in internal consumption in Brazil. With high Arabica prices over the last 2 years, there has been an internal shift in Brazil consumption of the robusta beans, which has enabled exporters to sell the higher priced arabica beans. Indonesia robusta production is expected to decline -20% during the 2023 season due to excessive rainfall.
Arabica prices traded as low as $1.6615 on March 31. Prices on April 19 reached $2.0600 as the May “C” contract came to a close , a 24% increase.
The Brazilian Real has rallied to a 10 month high against a weaker US $. Generally speaking, a declining US $ is supportive for commodity prices.
Looking at the physical coffee world, The ICO reported recently that global coffee exports from Oct-Feb were down -8.7% y/y , and it also projected the global 2022/23 coffee market deficit will widen to -7.3 million bags. A case may be made that a reason for the decline in global exports may be some demand destruction. Cecafe reported Brazil March coffee exports were down -19% y/y, and the Colombian Coffee Federation reported its March coffee exports declined -13% y/y.
The Brazilian 2023/24 harvest is drawing near and there will be much focus on the size of this crop. Estimates from coffee market participants have ranged from a low of 54.9 million bags(arabica and robusta combined) from CONAB, the National Supply Company owned by the Brazil government, to a high of 66.65 from Safras and Mercado, a Brazilian agribusiness consultancy group. Coffee prices will undoubtedly react to the actual size of this crop, as Brazil produces roughly 33% of the world’s coffee. We will certainly keep watch on this.
Getting into the more exciting coffee news… it’s Central America season!! Probably our favorite and busiest time of year for inbound coffee. New crop lots from Guatemala, Honduras, Nicaragua and El Salvador are rolling in – Costa Rica and a wide range of micro lots and experimental processing lots will be knocking on the door shortly. It’s a great time to plan for the rest of the year, contact us today so we can help with your plan.
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