Coffee physical market reacts in early July, following dollar and ICE

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Physical market reacts in early July, following dollar and ICE

The reaction in the dollar, which recovered the level of BRL 5.00 and resumed the level of BRL 5.50, ended up helping domestic coffee prices. More recently the reaction on ICE U.S., with arabica recovering the 100-cent level on the New York exchange. Thus, after heavy losses in June, the market shows signs of a reaction in early July, with the price highs increasing business liquidity to growers.

Good cup with 15% defects in the south of Minas is around BRL 510 to 515 per bag. Albeit above the price charged in June, it is still well below the average in recent years. Fine cup from Cerrado de Minas is trading at BRL 625 a bag in early July, in a behavior similar to that of good cup. The so-called group 1 coffees are closely linked to the fluctuation of the dollar and the external benchmark. Lower differentials in FOB exports for these descriptions only slightly mitigate the external effect.

The gains for weaker cups were smaller, indicating some detachment of the price formation variables for the best cups (dollar and ICE). Arabica rio with 20% of defects in Zona da Mata de Minas is around BRL 370 a bag in early July. A higher level than that obtained in June, but far from the 5-year average and very similar to the price charged at the beginning of that year (deflated quote).

Conillon also rose, following the dollar and ICE Europe. Type 7 is trading at BRL 340 per bag in Vitória, Espírito Santo. The gains are less significant, and conillon remains well below the 5-year average for the period.