Porto Alegre, July 15th, 2022 – The coffee market remains very vulnerable to international financial volatility. The realignment in the commodity price curve (CRB index) even allowed a slight relief to coffee prices on ICE US. However, the shadow of a global recession continues to bring negative pressure on commodities. In the case of coffee, the faster harvest pace of Brazil’s 2022 crop and the absence of more intense cold over the next few weeks in Brazilian coffee areas also weighs against prices.
The tumble of coffee prices in the international market again scared local growers, quite upset in the face of recent losses. They argue that certified stocks continue to fall, which points to a tightening world supply. The latest ICE report indicated only 759,600 bags of coffee were stored in accredited warehouses at the end of the trading session on July 13. Besides, even with the advance of the harvest in Brazil, physical availability here remains very short.
Despite these considerations, what prevails in the decision-making of agents on the New York exchange, at this moment, is the fear of recession. Thus, despite the lower production in Colombia, the decline in certified stocks in New York, and the growing doubts about Brazil’s 2022 crop, what has driven the price level is the slowdown in the world economy and its negative effects on consumption. The reading is that the tightening supply is a short-term situation, with the medium and long-term scenario signaling greater slack in supply. The USDA report indicated a world surplus of 7.91 million bags for 22/23. And this reading should gain an important reinforcement with the confirmation of good blossoming in the Brazilian spring, which might point to a full crop in 2023.
Thus, coffee in New York once again broke important supports, exposing technical weaknesses, which also ended up strengthening the bearish movement. The Sep/22 position again converges towards the important psychological level of 200 cents, which once lost validates the change in the slope of the coffee curve on ICE US.
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