Internal physical coffee market surges following ICE and dollar


The internal physical market skyrockets following the ICE and exchange rate and reaches historic levels. Good cup from the south of Minas Gerais is indicated at BRL 1,430 per bag, the highest deflated level since December 1999. This means that the purchasing power of a coffee bag is the highest in 22 years. When following the historical graph, the positive detachment of the current price of coffee in southern Minas is also very clear in relation to the historical average range of action delimited by the standard deviation (dotted lines).

The IGPM was used as a deflation index, as it reflects more strongly the inflation of the dollar. The comparison helps to show the strength of the current market, which only finds a higher price parameter in the frost in 1994 and the drought in 1997. This sequence of climatic adversity knocked down Brazilian production for a long period and made arabica prices surpass the 300-cent level on ICE US.

gráfico – Sul de Minas longo e deflacionado

            But even with the market significantly appreciated, there is not much interest on the sellers’ side. Growers remain on the defensive, lengthening positions and betting on a bullish sequence. In fact, the internal physical market has been characterized by necessity trades, with distant ends and a very wide spread between buy and sell prices. In this sense, buyers most in need of volume or wanting a specific description have to bring their bids closer to offers.

            Fine cup is pegged between BRL 1,490 and 1,510 a bag in Cerrado and between BRL 1480 and BRL 1,510 in the Mogiana region. The idea of ​​future commitment with fine cup ranges from BRL 1,520 to 1,600 against delivery and payment in Sep/2022 and from BRL 1,540 to 1,620 with liquidation in Sep/2023. The distance between the ends and doubts about production help to draw away liquidity from future negotiations. Moreover, the rising price curve also ends up driving sellers away. But it is good to remember that the deflated 5-year average of fine cup for the month of September is BRL 741.97 per bag, well below the currently practiced prices, which confirms the excellent moment for sellers.

            Rio cup with 20% of defects rose to BRL 1,250 to 1270 in the Matas de Minas region, finding support in the narrow availability. Conillon type 7/8 is indicated in Colatina at BRL 815 to 810 per bag.