Coffee prices are trying to mitigate losses in the internal physical market, after the sharp lows accumulated in recent months. The international market is showing signs that it has already priced in the arrival of Brazil’s 2023 crop, which relieves pressure and brings corrective breath, especially on the NY terminal. Despite the positive sign, this is not, at first, a trend reversal but just an indication of mitigation in the price curve. The fact is that the cautious and measured posture of demand does not make room for more consistent gains. The world coffee industry has been lengthening its positions to avoid carrying very high stocks, which justifies this slower pace in the flow of purchases, which takes strength from bullish moves.
In general terms, the market should remain attentive to the flow of shipments from Brazil, which serves as a kind of check on the real size of the Brazilian crop reaped this year. It is vulnerable to financial volatility as it awaits a new point of fundamental inflection. In this sense, the market disregards Brazil’s 2023 crop and starts looking more closely at the arrival of rain with the beginning of spring and its effect on blossoming, crop development, and the potential of Brazil’s 2024 crop.
These dynamics are quite common for coffee prices in New York. The fact is that once the harvest is finished, the market will begin to price in the expectations toward the next production in Brazil. Occasional changes up or downward in the size of the reaped crop tend to be adjusted via differential in the FOB export market.