Physical market surges and attracts coffee sellers

101

Physical market surges and attracts sellers

The Brazilian physical coffee market skyrockets following the rally on ICE Futures U.S.  With the dollar moving on the sidelines, there is room for the internal physical price to surge, especially in the case of the best cups, which are normally more sensitive to ICE and dollar swings.

Good cup in southern Minas soared and broke the 5-year average level at the beginning of August, converging again towards the April and May price levels. The rise in prices significantly increased business liquidity and generated new opportunities for growers to get cash and set margins. Good cup from southern Minas Gerais with 15% of defects is indicated between BRL 595 and 600 per bag in the physicals, a price level far above the deflated 5-year average. The future price curve has also become attractive for forward business, which explains the interest on the part of growers. The price reference is around BRL 610 to 620 for Sep/2021 and BRL 630 to 640 for Sep/2022.

Fine cup from Cerrado follows the behavior of good cup and also sustains good appreciation. The description ranges from BRL 620 to 625 per bag and also approaches again the average indications of April and May, recent market peaks. The prices in forward business of fine cup increased to 620 to 630 for Sep/2021.

Rio coffee is around BRL 410 to 415 per bag in the Matas region of Minas Gerais in early August. The gains are lower than those of the best cups. The supply of this coffee begins to grow, which mitigates the external influence on the cup prices. Finally, conillon type 7 from Espírito Santo, which is around BRL 375 a bag. The description shows a good reaction, although it does not follow, in the same proportion, the gains of arabica’s best cups. Weaker FOB export differential (-3 cents against ICE Europe, converted into cents/lb) and cautious domestic demand explain this behavior of domestic conillon prices.