Differentials for Colombian coffee rose to their highest levels in more than three weeks in the past week, amid continued weakness in futures prices and concerns that producers had oversold the upcoming mitaca, or mid-crop. The average premium for usual good quality Colombian arabica beans over second-month July coffee prices on ICE Futures US rose to an average of 18 cents a lb ex dock in the past week, the highest level since late March.
Futures prices remained in a range between $1.32 and $1.50 a lb, where they have been trading for much of the past two months. This is significantly lower than price levels in the preceding months, and producers have raised differentials to maintain margins.
While gains in Colombian differentials have been limited compared to Central American and Brazilian competitors, the recent gains in the country's peso currency, which hit a two-month high against the dollar this week, have further discouraged sales.
Gains in the peso reduce the incentive to sell by lowering local currency returns from sales in coffee, which is traded in dollars.
The market has been optimistic about the size of the country's upcoming mid-crop, but in the past week traders said the differentials being offered at origin began to rise, noting the crop has been delayed and merchants were unable to meet nearby commitments for shipments.
"Apparently more coffee has been sold for nearby May, June and July shipments than there is available," said Christian Wolthers, president of green coffee importers Wolthers Douque USA in Fort Lauderdale, Florida.
Differentials for Central American coffees, which compete with Colombia in producing high-quality mild washed arabica beans, remained high, as impact from a leaf rust disease known as roya has continued to depress yields during the 2014/15 crop year, and producers have been uneager to sell given low prices.