ICE tumbles with advance of coffee brazilian crop and high dollar


Arabica coffee falls and tests lows on ICE Futures US. The smooth advance of the Brazilian crop and the dollar’s rally against the real explain this behavior of coffee on the New York exchange. Without risk with the cold and mostly dry weather, Brazil’s 2020 crop takes shape and weighs against international prices. Brazilian aggressiveness, due to the very high dollar, further fuels this bearish scenario.

As a result, the July/20 position, which at the end of last week showed strength by recovering the reference of 110 cents per pound, closing Friday (8) at 111.65 cents, ended up erasing the gains in three trading sessions, closing at 105.05 cents on Wednesday (13). The accumulated decline in this brief period was 5.9%. The loss of the support at 105 cents could put coffee back towards the psychological level of 100 cents. The high dollar and arrival of the Brazilian crop play against prices. The climatic risk would serve as a counterpoint, but the picture is calm. Perhaps there is some financial relief, with improvement in the mood of investors. In any case, the external scenario is cautious and marked by pessimism, which also influences the coffee price curve.

Internal physical market supported by dollar

The domestic physical market remains firm, supported by the high dollar. In the south of Minas, good cup is trading between BRL 590 and 595 a bag in the physicals. The harvest of the new season is still advancing very slowly in the region, which keeps supply short and prices high, especially for the best coffees, which have been scarce. The idea for forward business with the new crop ranges from BRL 567 to 575 for delivery and payment in September 2020. The new dollar surge affects the future dollar curve and favors future prices. Ideas for September 2021 range from BRL 595 to 605 a bag.

Fine cup in Cerrado de Minas and Mogiana ranges from BRL 625 to 630 in the physicals, given the great scarcity of this description. Indications for Sep/20 range from BRL 600 to 610, and Sep/21 from BRL 620 to 630. High price in local currency keeps stimulating selling interest.

Rio cup with 20% of defects from Matas de Minas region ranges from BRL 405 to 410 per bag, finding support in the dollar and in the harvest progress with a mostly dry climate, which limits the supply of weaker cups. Conillon, on the other hand, continues on the rise at full crop arrival. Type 7 from Espírito Santo ranges from BRL 345 to 350 per bag, finding support in the good demand for exports.