KCNY and DOLLAR
After reaching the highest level in almost 7 years, the quotations of the futures contracts of NY opened the week in retreat, with the technical movements of contracts liquidation and no frost risk. The 3 successive severe cold waves of long duration, combined with the drought of the last few months, should continue to support coffee prices.
- The September/21 contract operated at 170-ish USC/lb during the week and ended Friday at 176 USC/lb, a negative weekly variation of 355 points;
- Besides the water and energy crises, the July frosts also weigh on the high Brazilian inflation. In an attempt to control it, on the 4th, the Copom raised Brazil’s basic interest rate (Selic) by 1% to 5.25%;
September/21: Min: 171.60 | Max: 179.35 | Last: 176.00 USC/lb
BRL/USD: Min: 5.1093| Max: 5.2750 | Last: 5.2423
*Data as of the completion of this report
WEATHER
- The forecast is for a dry August and higher temperatures than July/21, favorable conditions for the harvesting;
- No significant rains are forecast for the main coffee producing regions until mid-August;
- In the next 5 days, rainfall of less than 30mm is forecast for the Zona da Mata, Espirito Santo and southern Bahia;
- Some models show 3 more cold front waves in the first half of August, but apparently without risk of frost in the coffee areas;
- Rains should return with greater volume in September, very important for flowering.
DOMESTIC MARKET and FOB
- Basically, only occasional back to back deals, but supply and demand prices are very far apart;
- There is FOB demand for Rio Minas, however, business is stuck, as in the domestic market there are few sellers and the replacement prices are quite expensive, around R$900/bag for #17/18, with no margin to do business within the importers bids;
- The prices offered in the internal market for Bica corrida Bebida Dura type 6/7 are on average R$960-1030, varying between regions;
- It is estimated that the Arabica harvest has exceeded 72% in Brazil. Most of the new harvest lots available on the market are from the Zona da Mata;
- Some producers have already started the evaluation, and cleaning of the areas affected by the frost. While they evaluate, the future business is paused;
- The frost hit nurseries, producing Arabica seedlings, which affects the renewal of crops;
- The Leste de Minas Manhuaçu warehouse reached 113% of static capacity. The warehouse Atlantica Caparaó operates at about 80% of capacity. Other warehouses in the region operate between 30 – 50% of capacity.
LOGISTICS
The logistical chaos of shortage of containers, exorbitant freight and difficulty in booking vessels continue to challenge coffee shipments in Brazil. During the week, we observed:
- Lower container availability observed with MSC and Hapag Lloyd;
- Many daily cargo rolls and date changes without prior notice;
- No expected return of import containers with MSC;
- Opening times of the gates are very close to the deadline;
- New bookings:
- USA: some bookings have been confirmed for September;
- Europe: for most destinations there is space only for September;
- The chart below prepared by MBAgro shows the strong increase in international freight rates from East Asia to the USA since mid-2020 and getting worse in 2021;
- In times like these of high global demand for equipment and vessels, the competitiveness with high demand routes where there are such attractive prices for shipowners as China – USA reflects in greater logistical difficulties for shipments in Brazil;
COVID-19 IN BRAZIL
The rate of vaccination in Brazil has surpassed that of the USA in number of daily applications, about 5 months after the beginning of vaccination here. Over 1 million doses are applied daily in Brazil. According to the balance released by the Ministry of Health on Thursday (5), the country has the lowest daily average of deaths by Covid-19 in 7 months.
- People who received the first dose: +105 million (49.61% of the population)
- People fully vaccinated: +44.2 mi (20.91% of the population)
- Cases: + 20.6 million
- Deaths: 560.801 thousand