In Brazil, growers have been on the defensive because of growing concern about the lack of rain. The July frost and low moisture increase the potential for production losses in the next Brazilian crop. And this translates into speculation about a new rise in prices, driving sellers away from the market. The rain forecast for the next few days will not be enough to bring the climate back to normal. Moreover, moisture can make the blossoming happen ahead of schedule, which could result in abortion, since moisture must remain irregular, especially in the first half of September.
The withdrawn stance of sellers has forced trading companies and domestic industries, which need coffee, to be more aggressive in their bids. This leads to a detachment of the internal price from external price vectors. A typical off-season behavior, happening sooner this year due to the production losses in Brazil’s 2021 crop and the potential problems of Brazil’s 2022 crop.
Good cup arabica from the south of Minas is indicated at BRL 1,050 per 60-kg bag in the physical market. Despite the extremely inviting price, growers remain on the defensive, waiting for the result of the blossoming and the first impressions regarding the potential of Brazil’s 2022 crop. Most bet that the blossoming must show more clearly the losses caused by the lack of rain and extreme cold. And that would make way to a new leap in prices.
On the other hand, foreign buyers adopt a more cautious behavior towards Brazilian coffee. The blossoming raises great expectations, but with positive signs for the next Brazilian crop. This would bring more sellers to the market, shortening the distance between the ends, loosening differentials, and resuming business liquidity.
The weakest arabica cups remain valued, reflecting the limited physical availability in the current season. Besides the smaller output, the harvest under mostly drier weather is another factor lowering supply. Arabica Rio with 20% of defects in the region of Matas de Minas is indicated at BRL 870 a bag.