Besides the high commitment and doubts about production, another factor that explains the slow trade flow, even with high prices, is that the market has not deviated from the highs for a long time. This gives security for sellers to maintain a steady flow of sales and keep their bullish bets. But it is interesting to note that the 5-year deflated average for arabica good cup from the south of Minas Gerais is BRL 786.73 a bag. This means that the current indication of coffee prices, both for available coffee and appraisal of new crop prices, shows the purchasing power of a coffee bag is well above the average deflated by the IGP-M over the last 5 years. Even considering a higher cost, prices remain very attractive to sellers.
The movement is even slower with positions for Brazil’s 2023 crop. The indication for Sep/2023 is BRL 1,485, which is BRL 25 higher per bag for Sep/2022. Growers consider the difference small, which limits new business. The issue here is that the spread of coffee futures contracts on ICE US is negative, that is, the most distant maturities are cheaper than the current ones (with the bet on a larger future supply). And this ends up weighing on future pricing, even with a positive future dollar curve.
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