The physical market remains very firm, following the gains in the international market. Good cup from southern Minas Gerais is bidded at BRL 1,170 a bag in the physicals. Fine cup costs around BRL 1,200 a bag in Cerrado and Mogiana. Rio cup has recovered the level of BRL 1,000 a bag in Matas de Minas, and conillon 7/8 in Colatina (ES) around BRL 700 a bag. Growers must remain attentive, trying to take advantage of price rebounds, staggering sales, and managing opportunities, especially if they still hold plenty of physical coffee.
New-crop price indications also advance, although with little liquidity on both sides. The Sep/23 expiration, despite being catapulted by gains in the spot position, does not rise in the same proportion, which reinforces the short-term bullish reading. The difference between May/23 and Sep/23 has risen to 3.60 cents. The inverted market hinders trading with future crops. In financial terms, it is not worth carrying the position over time as the future price is lower than the current one. From the grower’s point of view, the lower prices offered for the future crop end up taking away selling interest, driving focus to the physicals.
However, growers are more vulnerable this season than in previous years due to the lower percentage of sales of Brazil’s 2023 crop. The latest SAFRAS survey pointed to the sale of only 17% of the expected 2023 Brazilian crop, even so with arabica accounting for 25% of it. In the same period last year, forward sales were at 27%, with arabica accounting for 30%. A lower sales percentage of a crop that is expected to be bigger. In this sense, one should keep an eye on margin locking, besides trying to take advantage of the ICE and dollar rebounds to set some prices with the new crop. The strategy is to reduce exposure at the crop arrival. And with that, facilitate the management of the commercial flow for the rest of the season.