Coffee soared again in both London and New York. The fundamental trigger for the high is concern about the crop in Vietnam and Brazil, the world’s two major growing countries. In the case of Vietnam, irregular rains, especially in the central region, continue to raise concern about crop development after blossoming. The first projections are already beginning to appear, which reinforce the pessimism about production. Volcafé, for example, projects the 24/25 robusta coffee crop in Vietnam at 24 mln bags, the lowest level in 13 years, given the irreversible damage caused by the drought. Thus, robusta traded in London, which reached a bottom of around USD 3,400 a ton in the first weeks of May, has risen again, and the July/24 position is trading above USD 3,800 a ton. Robusta gains influenced the arabica high in NY.
Production in Indonesia is expected to grow, according to the USDA attaché, who projects a crop of 10.90 mln bags, with 9.5 mln of robusta and 1.4 mln of arabica. While arabica production should remain stable, robusta production is projected to grow 41.6%, or in absolute numbers, an increase of 3.2 mln bags, which helps offset losses in the Vietnamese crop.
Crop assessment, cold, and attitude of Brazilian growers
The first assessments of Brazil’s crop started the debate not only on the size of production but also on the quality of the BR-24 crop. The Brazilian conillon harvest is a little late and presents an average yield below expectations, which increases the correction in the crop number. The arabica harvest indicates smaller coffee beans, which is a concern regarding the screen profile of the crop. It is important to consider that the beginning of the harvest does not offer the best samples for the result. The harvest must advance further so that a more accurate notion of reality is possible.
Another relevant factor is the approach of this year’s first polar air mass in Brazil, which should lower temperatures from next weekend in the South region, with the cold also extending to São Paulo and Minas Gerais, especially the south of the state. Although the risk of frost is low for now, the arrival of the first polar air mass serves as a warning for the upcoming cold season. The transition to the La Niña phenomenon reinforces this risk as, with the drier climate, facilitates the arrival of the polar air mass to coffee-producing regions of Brazil.
Contrary to expectations, coffee prices in NY ended up rising, despite the arrival of the new crop on the market. However, it is important to consider that, in addition to the harvest delay, the current supply of conillon is being used almost entirely to meet export contracts. Therefore, this coffee is not being offered in trading areas, which reinforces the perception of scarcity in the market. As for arabica, the proportion of the crop reaped so far is quite limited. It is expected that the supply of new coffee from Brazil will begin to have a greater impact on the market from June onward.
Growers are adopting a more defensive stance, being less eager to negotiate. The rise in prices in April ended up triggering a good flow of sales, allowing growers to be more capitalized and less exposed to the arrival of the crop. This situation is reflected in the current caution. The increase in the supply of new coffee on the market should put some pressure on prices, but the harsher winter, which is expected for this year here in Brazil, should help to contain sentiment a little. In any case, the price of good coffee in the south of Minas Gerais, which had fallen to BRL 1,110, recovered to the level of BRL 1,230 per bag. It is true that it is still below the BRL 1,300 per bag reached last April, but it is still an interesting level, which should not be underestimated especially by those who are short on cash for the harvest and their commitments at the start of the crop. The strategy is to continue, without haste, staggering positions, and taking advantage of the good moment.