The physical coffee market ended up losing strength and is once again bending negatively. The slowdown on ICE US, the weaker dollar, and especially the expectation of the arrival of new coffee in the market end up weighing against prices in the Brazilian physical market. The supply of new coffee is still short. And the resistance of sellers is still great. And this ends up inhibiting more expressive losses. The progress of the harvest and the confirmation or not of a full crop, as expected, together with the posture of sellers will be decisive for the price curve in this crop arrival.
Arabica good cup in the south of Minas is indicated at BRL 1,070 a bag in the physicals, pointing to a decrease in comparison with the average reached last April of around BRL 1,102 a bag. In real terms, with prices deflated by IGP-M, the negative slope of the price curve at the beginning of May is more clearly perceived, with the market trying to break the lateral logic of recent months.
The arabica harvest should gain strength from the second half of this month, and this changes the behavior of growers, especially those who lack liquidity or have made only a few sales, particularly of the new crop. The change in behavior, albeit still timid, has already impacted prices, which are once again converging toward the 5-year average reference, following the seasonal behavior of a crop arrival. But the truth is that the price is still far from the deflated average reference for the period, which is around BRL 862.22, which maintains the area of opportunity for sellers, even with a narrower margin than previously seen.
It is also important to point out that new crop indications are around BRL 960 to 980 a bag for delivery and payment in September this year, which signals weaker prices going forward. It is a big step in this transition between crops here in Brazil, which can cause friction between the ends. It is important for sellers to reduce a little their exposure to this situation.
Fine cup is indicated in the Cerrado at BRL 1,100 a bag, finding support in the face of the limited supply available. New crop idea between BRL 995 and 1,020 for Sep/23. In the Matas de Minas region, the harvest is still starting slowly, but a little premature new coffee is starting to appear, with a high level of defects, but which ends up influencing the physical prices. The idea for hard cup arabica with 40% of defects ranges from BRL 970 to 1,000, against remainders at BRL 1,040 with 20% of defects. Rio cup retreats to BRL 940 a bag, pressured by the emergence of new coffee in the market. As a counterpoint, there is some interest in arabica with weaker cups on the part of the domestic industry due to the high price of conillon.
The conillon harvest has sped up after the initial delay, but robusta’s firm prices in London help to hold back the sales momentum. And the market shows support, with type 7 in Vitória indicated at BRL 665 a bag. The market remains positively distant from the average reference for the period, but the advance of new conillon may favor a new negative realignment in the price curve. The dollar value, robusta prices in London and, especially, the sellers’ behavior will determine the intensity of this occasional adjustment in prices.
With conillon appreciated, the difference from arabica destined for domestic consumption was diminished. Thus, hard arabica with 600 defects is bidded at BRL 950 a bag, with the difference from conillon falling to BRL 285 a bag, well below the BRL 550 that it reached last year. It is still high but already attracting attention from the industry, especially if this trend persists with the advance of Brazil’s 2023 crop.