The proximity of the new crop leaves the prices in the domestic physical market more vulnerable to external volatility. The recent fall ended up partly undermining the bullish logic that was prevailing among sellers, generating distrust and increasing selling interest. On the other hand, the flow of delayed shipments and the more cautious external demand end up reducing the interest of exporters. This way, the price spread remains large and business scarce.
Price ideas in the physicals keep in line with the ICE volatility, the fall in the dollar, and wider FOB export differentials. Bids for good cup from the South of Minas fell to 1,320. Even so, it remains in a positive region for sellers. Apart from the current moment, it is the highest price level since March 2011, using as a reference the historical series of prices deflated by the IGP-M [inflation index]. This means that the current purchasing power of a coffee bag in the south of Minas Gerais is the highest in 11 years, even with coffee having lost more than BRL 200 per bag since the price peak in early February until now.
Fine cup from Cerrado (MG) or Mogiana (SP) is bidded around BRL 1,360, being less impacted by the ICE and dollar losses. The limited supply available softens the negative pressure on this description. Rio coffee with 20% of defects from Matas de Minas fell to 1,210 a bag and follows the movement of distance detachment from the old reference of BRL 1,400 a bag. Shorter demand and proximity to the new crop, with early harvest coffees starting to appear on the market as early as late March and early April. Conillon 7/8 in the Colatina region of Espírito Santo changed hands at BRL 770 a bag, following the losses with the proximity of the new crop and finding some support from demand and improved prices in London.
Indications for positions with future crops follow the physical market and also ended up retreating. Good cup for Sep/22 is ranging from BRL 1,320 to 1,360 a bag, in line with physical prices. The same description for delivery and payment in Sep/23 is indicated between BRL 1,330 and 1,370 per bag, maintaining a difference of only BRL 10 per bag above the indication for Brazil’s 2022 crop. And it sustains this slight advantage largely due to the future dollar curve (inflated by the high Selic rate), since the spread between coffee positions on ICE US remains negative.