Coffee falls on ICE US due to selling pressure

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The recent pull in coffee prices attracted further interest from sellers, and the market eventually gave in, losing the 180-cent level on ICE US and advancing toward other important supports. Coffee had accumulated gains of nearly 12% in the first two months of the year on ICE US, standing out positively among Brazilian agribusiness commodities. This performance, of course, attracted greater sales interest, changing the behavior of growers, who perhaps no longer believe in the market as much as they did a few weeks ago.

Of course, this made room for a retreat in New York and export differentials in growing countries, particularly in Brazil. The justification for this change in the attitude of growers is the proximity of the new Brazilian crop, which keeps the promise of being full. The conillon harvest, by the way, is about to begin.

In the FOB Brazil market, coffee is trading in the physicals with still very firm differentials. Fine cup screen 17/18 is pegged at +7 cents against ICE US. MTGB good cup remains highly valued, even though its external base is operating with a negative spread against New York (retreating to -5 cents at the port of Santos). The average sell price for the description between the years 2018 and 2022 for March was -17 cents, well below current offers. Rio Minas sought a greater negative adjustment, even so it also remains valued, which keeps buyers on the defensive. Conillon 13 up is indicated at +9 cents, without external competitiveness.

However, the main reflection of the growth in selling interest comes from new-crop positions. On FOB Santos, MTGB good cup coffee is bidded at -18 cents for shipment during the second half of 2023. Albeit still above the average reference for the description at the crop arrival, which ranges from -20 to -21 cents, it is already well below the base seen in the physicals. Fine cup 17/18 is quoted at -9 cents for the new crop.

Weaker differentials for the new crop together with the inverted spread on the futures exchange, with the Sep/23 position below May/23, bring negative pressure on the prices of Brazil’s 2023 coffee crop. The growing selling interest, on account of the approach of the next Brazilian season, may further accentuate the selling pressure at the crop arrival. For this reason, growers should be very attentive, especially those who have a very vulnerable liquidity position for the crop arrival.

Normally, there is a concentration of debts during the harvest period. And being hostage to the market during this period is quite dangerous. Thus, growers need to reduce this exposure a little at the crop arrival, managing margins and seeking to take advantage of both this temporal distortion and high volatility, as observed in these first months of the year.