Financial issues make coffee lose 130-cent mark on ICE U.S.

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FINANCIAL ISSUES MAKE COFFEE LOSE 130-CENT MARK ON ICE U.S.

The market backed off and moved away from the highs on ICE Futures U.S. Arabica IN New York went through corrections, given the signs of overbought market. The losses gained intensity with the breach of the important support at 130 cents per pound and the increase in sell orders. The accumulated decline in crude oil and its negative influence on the CRB index, as well as the increase in the dollar index, serve as financial reference. Selling interest from growing countries, seeking to take advantage of the recent highs, explains the adjustment on the fundamental side.

The market remains very attentive to certified coffee stocks on ICE Futures U.S. and, of course, carefully monitors the climate in Brazil. The combination of lack of rain forecast for the next few days with the accumulated water deficit during the first semester of 2020 creates a lot of concern. The extended forecast points to rain only by the end of September, with a more regular picture of rain over the coffee belt only in late October. This is an early spring that deserves care, not only about the blossoming development but also the early graining, which can bring volatility, in a typical characteristic of the weather market. It is worth noting that the recent increase in international coffee prices is partly linked to the adverse climate and the potential of the next Brazilian crop.

ICE U.S. certified stocks have fallen to the worst levels in 20 years, which helps support international coffee prices. However, this also makes room for Brazilian semi-washed (cherry) coffee in the U.S. market. Last Friday’s report showed the addition of 855 bags of Brazilian origin to certified stocks on the ICE warehouse in Antwerp. The data also show that other 3,060 bags were disapproved, quite possibly from Brazil too, due to rigid quality control.

The fact is that the high price on ICE Futures U.S. and the weak differentials at Brazilian ports end up boosting the certification of Brazilian semi-washed in the New York exchange. This situation is amplified by the high dollar against the real.