Weak physical coffee market, assimilating external losses

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The physical market still assimilates the external tumble and keeps moving away from the top. The surge in the dollar only relieves the external pressure. Good cup, which was trading at BRL 605 a bag in early September, is currently around BRL 535 a bag, down 12%. Although this tumble scares sellers, it still sustains coffee prices at a level well above BRL 475 per bag at the crop arrival. The finest coffees follow a similar behavior, falling from BRL 630 to 565 per bag in Cerrado de Minas. These descriptions are more vulnerable to swings of ICE futures and the dollar.

Weaker prices and good volume of business previously closed by growers end up driving sellers away from the market. Growers have been more careful, betting on a new price rebound. After all, the harvest of Brazil’s 2020 crop has just ended. Volatility in both ICE futures and dollar has also pushed buyers out of the market. They also take advantage of this truce in business to try to put the house in order, after a very busy crop start.

This behavior also extends to forward positions with the future crops. It is good to remember that good cup, which was trading ahead of BRL 620 a bag in early September, is currently between BRL 550 and 565 a bag for delivery and payment in September 2021 in the south and Mogiana, respectively.

The weakest cups have shown a timid reaction after the recent losses. They find some relief in domestic demand, albeit still very timid. Rio cup in Matas de Minas region is around BRL 385 per bag. It is the same level obtained by conillon type 7 in Colatina, Espírito Santo.