The “weather market” gained prominence on the New York Stock Exchange in early March due to concerns about dry weather and high temperatures in Brazil. The intense heat between late February and early March caused plant stress and could harm the crop. It is worth remembering that the production scenario in Brazil already points to a crop failure in the 2025 season due to the drought between April and October last year. Thus, a new climate concern gained relevance, especially in a scenario of low stocks and a shortage of coffee held by growers. The Carnival holiday in Brazil contributed to the gains, as it reduced market liquidity, reinforcing the impression of few sellers on the market, which helped fuel the price rally.
The May 2024 position surpassed the 400-cent mark, traded at last Tuesday’s (4) high at 418.55 cents per pound at the NY terminal. However, the forecast for more widespread rainfall in the second week of March brought relief and encouraged the dismantling of climate protection. As a result, coffee lost its 400-cent reference, which triggered technical sales and sharpened the losses. The market fell 5.6% in the trading session last Thursday (6) on the US stock exchange alone. Volatility is characteristic of the “weather market,” but the financial turmoil caused by the “tariff war” initiated by Trump undoubtedly contributes to market instability, particularly in response to the dollar’s swings.
Brazilian growers await the “Saint Joseph flood”
It is logical that the stress caused by the lack of rainfall and high temperatures has consequences for the plants, but since most plantations have coffee on the trees, this effect can be mitigated if this adverse climate situation does not persist for too long. Therefore, the market will keep an eye on the weather in Brazil, which will start to change next week with the advance of a cold front. Moderate rainfall is forecast for the strip that extends from Paraná, passing through São Paulo and the south and Matas of Minas Gerais, and reaches the south of Espírito Santo. In the other areas, especially in Cerrado de Minas, the rain will only return during the second half of March, with the long-awaited “Saint Joseph flood.” Confirmation of this scenario of more abundant and widespread rainfall would bring relief and, naturally, reduce climate tension about Brazil.
