The losses abroad associated with the weaker dollar against the local currency end up weighing negatively against coffee prices in the domestic physical market. With this, the market expedites the downward movement in the face of seasonal pressure from the advance of new coffee supply in the market. Interestingly, this movement has taken place despite the seller’s reluctance and low business liquidity. The fact is that the physical market follows the external weakness without showing much resistance. The shorter demand contributes to this realignment. Exporters remain more concerned with closing late shipments than setting new positions.
Thus, physical prices are moving towards levels much lower than those practiced at the beginning of February. Good cup from the south of Minas is indicated between BRL 1,290 and 1,320 a bag. Fine coffee in both Mogiana (SP) and Cerrado de Minas ranges from BRL 1,340 to 1,360 a bag. This description changed hands in early February at BRL 1,560 a bag, surpassing the line of BRL 1,600 a bag for certified coffee lots.
Rio cup with 20% of defects from Matas de Minas is pegged at BRL 1,150 to 1,180 per bag, far from the BRL 1,400 per bag reached in February. And the conillon 7/8 in the region of Colatina, in Espírito Santo, shows a timid reaction and is indicated at BRL 770 to 790 in the physicals. Short supply offers some support, although the industry remains on the defensive as the new crop approaches.
The indications for the new crop remain very close to the ideas in the physicals, which drives sellers away. The inverted spread on ICE justifies this movement, with the futures price not being lower only because of the high Selic rate and the larger spread in the future dollar curve. Good cup ideas for Sep/22 range from BRL 1,290 to 1,320 a bag and rise to 1,300 to 1,330 (+BRL 10 a bag) for Sep/23. Despite the attractive price, the small difference between available and future coffees continues to inhibit the interest of producers.