The price in the domestic physical coffee market sharply dropped, associated with the New York bearish combo, weak dollar, and negative correction in differentials in ports. While the US stock exchange prices the idea of greater supply stability throughout the 23/24 season, the export base (differential) reflects seasonal pressure with the arrival of a new coffee in Brazil. The dollar, albeit volatile, sustains a negative slope. Of course, this ends up weighing against internal physical prices. It is also clear that the market has changed its features, with more sellers than buyers, which reinforces the negative pressure on prices.
Growers entered the crop with a lower sales percentage than in previous years, betting on the winter and a smaller harvest. But the full crop of arabica and the absence of climatic risks play against prices and force a behavior change, intensifying the natural selling friction at the crop arrival. There is also a greater stratification in prices between descriptions. Conillon gains value against arabica, following external signs. And the finest arabica cup is more valued than weaker coffees, reflecting the lower supply of Colombian milds.
In the south of Minas Gerais, good cup is indicated at BRL 820 a bag in early July, continuing the losses of June and the downward movement, after the bullish peak at the beginning of the year. The price of good cup in southern Minas Gerais, deflated by the IGP-M (see graph) is already below the 5-year average for the month of July, which confirms the new status of the price curve and the downward shift in the domestic physical market.