KCNY and DOLLAR
- The fundamentals were strong during the week, supporting new highs in Arabica prices, reflecting the concern with the world coffee supply, given the dry weather in Brazil and the difficulties in Colombia and Vietnam;
- In Brazil, the coffee prices on supermarket shelves rose by 8.31% from January to July/21. According to ABIC, as of September it may be up to 40% more expensive for the Brazilian consumer, in response to the effects of the prolonged drought and frosts;
- The Real depreciated against the dollar this week amid an agitated political scenario in Brazil. Several factors, such as high inflation and a polarized presidential election in 2022, may keep the Brazilian currency weaker still in the coming months.
September/21: Min: 172.15 | Max: 187.35 | Last: 182.90 USC/lb
BRL/USD: Min: 5.1651| Max: 5.298 | Last: 5.2310
*Data as of the completion of this report
WEATHER
- Days have been warmer, and no rain is forecast for most Arabica areas in the next 15 days, favoring the completion of the harvest and the quality of the 21/22 crop;
- The lack of rain in August intensifies the water deficit in the country, low soil moisture content and adverse conditions for the 22/23 crop;
- The accumulated rainfall in Minas Gerais last week was only 0.8 mm, 11% of the historical average, according to SOMAR;
- There are new cold fronts forecast for August, expected to arrive on Wednesday (18) in the Southeast region but without frost risks;
- The return of the rains in September is on the radar of the market, a flowering season very important for the next year’s crop.
DOMESTIC MARKET and FOB
- The physical market this week showed low liquidity, few sellers and with few deals done;
- Highlight for a greater difficulty in making new business of Rio Minas. At the origin, the supply of this quality has been much lower and at higher prices than in previous years. Besides the lower volume of the 21/22 crop, there has been little rainfall during the harvest time in the Zona Mata region, an important phenomenon to get the Rio cupping profile;
- Rio Minas replacement prices have been far from the levels of international buyers, such as Turkey and the Middle East, who are highly price sensitive and consider current levels expensive and unviable for business;
- Bica corrida Rio Minas (R$ 830-850), Bica corrida Duro tipo 6/7 (R$1020-1070);
- It is estimated that the arabica harvest in Brazil has reached between 75-80% and has shown a sped up pace in recent weeks, favored by dry weather;
- The impacts of the cold waves in Brazil are still being evaluated and interpreted by the market. Besides the burning of leaves, the death of apical and reproductive buds is being evaluated. In more affected plantations, pruning, renovation, or replacement by annual crops may happen. Frost affected some nurseries, and there may be a lack of seedlings for renewal.
JULY EXPORTS
Major international logistical difficulties have affected the performance of Brazilian coffee shipments. According to CECAFE, in July the total volume of coffee exported from Brazil fell by 12.8% in relation to the same period of the previous year, much due to the international logistical chaos. Brazil’s export figures in 60-kg bags:
- Total: 2,826 million (-12.85%)
- Green coffee/raw: 2.512 million (-12.4%)
- Green Arabica: 2.11 million (-12.75)
As we have commented in our reports, cargo roll-overs, lack of food-grade containers and lack of space on vessels have been frequent.
LOGISTICS
- Many ship roll-overs by MSC and Hapag Lloyd, causing delays and extra storage costs at the port;
- We did not find any food-grade containers with MSC this week;
- Destinations Europe already have allocation restrictions for September/21;
- For US ports, all requests, with all shipowners, were declined due to lack of space on vessels or shortage of containers for August and September.
COVID-19 IN BRAZIL
- People who received the first dose: +112 mi (52.911% of the population)
- People fully vaccinated: +48.2 million (22.8% of the population)
- Cases: + 20.2 million
- Deaths: 567,000
Let’s keep believing and investing in the coffee culture!
Stay well,
Atlantica Coffee Team