KCNY and BRL/USD
Throughout this week, the market followed-up the climate in Brazil, exchange rates and reports on the 21/22 harvest.
The March-21 contract operated between 116.45 and 123.55 USC/lb. The Brazilian real oscillated between 5.0136 and 5.1974 in relation to the dollar, which after 5 1/2 months, operated again around BRL/USD 5, which gave strength to coffee prices in NY. Since November 2, the real is the currency that has most appreciated in the world (+13.6%).
The market reacted positively with the news that the tax reform in Brazil can be voted on next week, attracting foreign investment and helping to increase the BRL’s value. Copom announced to maintain the Selic at 2% per year, the basic interest rate in Brazil.
There is also concerns about the impacts of the hurricane on Central American coffee production. The approval of vaccines, with a horizon for 2021, even brings an optimistic feeling for coffee consumption, however, the record numbers of new Covid-19 infections in the world and the American economy bring caution.
WEATHER
In the last 7 days, high volumes of rain and milder temperatures were registered in Minas Gerais, Brazil’s largest Arabica producer, in Espírito Santo and other places.
The weather in December has favored the recovery of the crops, and it is already possible to see the new fruits. There is a lot of talk about a crop decline in 21/211 above 30%, and it can reach 40% in some regions, due to the pruning carried out, the long drought of 2020, the off-year, and the conditions of the crops. However, it is prudent to wait for the months of January and February to estimate the crop decline with greater accuracy.
SOMAR Weather forecasts point to regular rainfall for the next few days in the main coffee regions. For the next 6 days, we estimate up to 90mm in the Cerrado, South of Minas and Zona da Mata and between 50mm and 70mm in Paraná, São Paulo and South of Espírito Santo.
DOMESTIC MARKET AND FOB
The producer, well sold and capitalized, remains cautious in business. Quiet market, happening under specific demands. According to the consultancy Safras e Mercados, 74% of the 20/21 production is sold. In the same period of 2019, 71% of the 19/20 crop was commercialized. The general warehouses are full, but with normal flow of operations.
BRAZILIAN EXPORTS – CECAFE
According to a report by CECAFE released on Wednesday, Brazil recorded the highest record for the month of November in coffee exports, which led to downtime sessions on Wednesday. The good Brazilian performance came even in a scenario of pandemic and international logistical difficulties.
– 4.3 million 60 kg bags of green, soluble and roasted and ground coffee were exported;
– 3.7 million exported green Arabica, representing 85.1% of the total;
– Exchange revenue in reais: R$ 2.9 billion (+ 72.5% p.a., supported by the strong devaluation of the Brazilian currency);
– Exchange revenue in dollars: USD 541,958 (+ 32.35% p.a., the highest revenue for the month in the last five years);
– Average price per bag: US$ 124.90 (+0.1% p.a.).
INTERNATIONAL LOGISTICS IN BRAZIL
The challenges in international logistics with the lack of containers and space in vessels continue to occur. The sending in advance of Shipping Instructions is essential for us to anticipate bookings.
Container inspection at CMA CGM Depot is not being allowed. This step ensures that the container fits the food standard to receive the cargo and can be used in the transportation of coffee safely. Atlantica has the commitment, care and responsibility to deliver quality to the clients who buy our coffees, therefore, we are suspending shipments with this shipowner until the inspection is authorized again.
COVID-19 IN BRAZIL
Cases: 6,78 M
Deaths: 180 K
Recovered: 6.04 M
Let’s keep believing and investing in the coffee culture!
Take care,
Atlantica Coffee Team