Who calls paysComment, 17 September, Jos Algra
A rule I learned when exporting coffee. If you are in need to sell coffee you will have to lower your price in the negotiation and, the other way around, if the buyer has an urgency to contract coffee, the exporter will raise the price.
For weeks now exporters have fixed limited volumes and the industry is waiting because NY and the differentials are so high. Colombia got on the phone this week, started to sell and the differential plummeted almost 20 cents. Central America remains quiet, little volume.
The same happened last year, by September – October the differentials had returned to their “normal” levels, but the problems in Colombia repeated and in January the differentials soared again. Sell or wait?
Check your harvest plan well to determine how much contracts you need for pre-finance to start the harvest, the rest can be contracted later on, until you see how the harvest and the prices are evolving, so you won’t default on the contracts and make a loss.
The market didn’t manage to create another flag and rally above 200; today Friday 17 NY gave the first signal that the market is weakening. If it breaks through the support at 185-187 it may well return to the 165 level. Is this the end of a perfect storm (high prices, high differentials, low stocks and concerns about the harvest)? Who knows, experts say there is space for the market to go up to 230. Any doubt regarding the climate and production may take the market to new highs.
Hurricane Karl swept over Mexico and the next cyclone is already announcing itself, the drought in Brazil seems to be over, but “la niña” is causing problems in Indonesia, delaying drying and exports. The doubts regarding Colombia continue and the crop forecast was lowered to some 9 million bags.
The certified stocks of NY have fallen below the psychologically important limit of 2 million bags, but stocks will be replenished with the surplus of 6-7 million bags of Arabica that is forecast for this season (3-4 million bags in the case of Robusta). On what will the market be focusing during the next few months, the surplus of this harvest or the deficit expected in 2011/12?
Progreso Network will publish a weekly analysis about trends and prices of coffee from the consultant Jos Algra. Jos has 20 years working experience in the coffee trading and consulting on risk management in coffee organizations.