Negotiations continued very active in April and early May, given the good prices in the physical market. The dollar rally ended up raising physical prices in reals, but the counterpoint was the decline in dollars. This made Brazilian origin cheaper in the international market, leading to growing interest on the part of foreign demand. The relative appreciation of the best coffees, with fine cup and cherry exchanging hands over BRL 600 a bag, ended up stimulating selling interest in the physical market, with strong competition in the face of the first news of the arrival of coffee from Brazil’s 2020 crop.
The SAFRAS survey indicates that until May 11 the commitment of the 19/20 crop by growers reached 94% of production. The sales flow continues much faster when compared to the same period last year, when it reached 86% of the crop, as well as above the 5-year average for the period (91%).
Arabica trading reaches 92% of the expected output. Sales of these coffees are well above the same period last year (84%) and slightly higher than the average for the period (90%). Conillon sales, on the other hand, increased to 96%, above the same period last year (91%) and the 5-year average for the period (93%).
New-crop sales reach 28%
High prices, due to the stretched dollar, keep sustaining a high interest in forward sales with future crops. It is true that higher prices in the physicals have weakened some of the interest in forward business with Brazil’s 2020 crop. Moreover, trading companies eased their foot off a little with very net long positions (Brazil’s 2021 and 2022 crops, for example). Market volatility, especially in the exchange rate, has increased protection costs and strangled credit, which fairly reduces activity. Even so, the sales flow did well last month.
In the regions where forward sales are more usual, as the south and Cerrado of Minas Gerais, and Mogiana region, in São Paulo, commercialization remains active. Sales are around 39% to 44%, reaching 49% when adding future sales and exchange operations. In Matas de Minas, on the other hand, growers committed 17% of Brazil’s 2020 crop, which is a relevant index, since it is not very usual to sell in advance there. In the case of conillon, around 17% of this year’s Espírito Santo crop have already been sold by growers, considering physical and futures sales. In Rondônia, this index is 19%, basically concentrated in the physical market. High dollar has left the Brazilian conillon very competitive in the foreign market, which makes exports more attractive. Proof of this is that the price of conillon in local currency has gone up at full crop. Therefore, the expectation is for a good external performance of conillon in the 20/21 season, which helps dry up the great production expected this year.
SAFRAS projects sales of 28% of the 20/21 crop in Brazil through May 11, involving both physical and forward sales. Besides staying 5% above the previous month, it is also well above the same period last year (17%). Arabica sales reach 33% of the expected output, against 17% in the same period last year. Conillon trading is at 17%, slightly below 18% in the same period last year.