After the tumble in March, arabica slowed down in April. Cerrado’s fine cup has dropped from the peak at BRL 320 a bag in early February to the current price of BRL 1,240 a bag. The market is now on the sidelines, awaiting the advance of Brazil’s 2022 crop, which for arabica must gain more pace only as of May. Meanwhile, it is vulnerable to the ebbs and flows of the ICE and dollar. The decline in the level of operations on ICE US is partially offset by the dollar’s high.
Coffee remainders from Brazil’s 2021 crop range from BRL 1,210 to 1,230 a bag for hard cup, depending on defects, in Matas de Minas. Some early new coffees are already appearing in the market, with indications at BRL 1,190 a bag with up to 30% of defects. The market begins the transition between crops and with the gradual increase in the supply of new coffee, the market indication will naturally converge towards Brazil’s 2022 crop.
Also noteworthy are the offers in advance for new-crop arabicas. The idea for Sep/22 is in line with the physical market. The average for a good cup for Sep/23 is indicated between BRL 1,220 and 1,240 in the south of Minas, just slightly above the physicals. The inverted spread explains this behavior. The difference between Sep/22 and Sep/23 on ICE US is -2 cents. It indeed used to be much bigger, but the realignment of the market forced a rapprochement. However, the idea for Sep/24 is 197 cents, which corresponds to 11 cents below the price practiced on ICE US for Sep/23. Therefore, the price for Sep/24 is around BRL 1,230 to 1,240 a bag. And it would have been lower if not for the steeper future dollar curve, due to the higher Selic rate – the interest rate serves as the basis for the spread between maturities on the future dollar curve.
Internal consumption focused on conillon
The domestic industry continues to face difficulties to meet the domestic market supply, given the few offers and high prices. Arabica 600 defects is pegged between BRL 1,180 and 1,230 a bag, depending on the aspect and size of lots. Despite the price of arabica having retreated from the peak in February, the industry’s preference for conillon continues, which, even when valued, is cheaper. The idea for conillon 450 defects in São Paulo is around BRL 850 to 860 a bag, against Rio cup 600/800 defects between BRL 1,090 and 1,100 a bag. New coffee from Rondônia is already coming out between BRL 750 and 780 a bag. This difference has kept the local industry active with conillon. And that must be the trend, at least during the crop arrival.