Weekly report – Brazilian Coffee Market – July 19-23, 2021 | Atlantica
Ordem Mínima
+55 31 98258-7114 Av. Princesa do Sul, 1885 | B. Rezende, Varginha, MG, Brazil | ZC: 37062-447

Weekly report – Brazilian Coffee Market – July 19-23, 2021

by Jul 23, 2021Market report1 comment

Following the frost that hit Brazilian crops in the early hours of Tuesday, coffee prices soared in the international and domestic markets, renewing highs as a greater sense was gained of the intensity and extent of damage to Brazilian crops and impacts on the 2022 world supply.

  • On Friday morning KCU1 reached 209.5 USC/lb, but corrected returning to the 190 USC/lb level;
  • The market is still volatile and pricing the losses, but if the frost forecast for the end of July is confirmed, conditions may favor a new bullish scenario;
  • The delta variant worries the markets with the increase of infections even in countries where vaccination is accelerated, with the risk of a brake in the world’s economic recovery and lower consumption of coffee outside the home;
  • The dollar strengthened, and the real remained more stable during the week.

September/21: Min: 155.25 | Max: 209.50 | Last: 189 USC/lb
BRL/USD: Min: 5.1178| Max: 5.2946 | Last: 5.1106
*Data as of the completion of this report

This week we experienced a historic and sad moment for many Brazilian coffee growers. Tuesday’s early morning frosts affected not only coffee plants in the South of Minas, the main producing region in Brazil and the world, but also in the Cerrado, Mogiana and Paraná regions. This was the second frost to hit Sul de Minas in less than a month. The frost did not reach the Zona da Mata region, Bahia and Espírito Santo.

  • On Wednesday and Thursday, our field team visited the South de Minas and Mogiana regions to identify the intensity of the damage. We believe that the real impact on the crops will only be truly understood in the coming weeks, when we will conduct a new crop tour and release updated figures;
  • In this first survey, we estimate that the 2022/2021 crop will be 2.5 to 3.5 million bags smaller in these regions. In most crops, the damage is concentrated in the lower areas of the property and in the upper part of the plant, burning the leaves and upper branches, known in Brazil as “capote” frost;
  • However, there are different scenarios and intensities. Estimates from different market players vary between 2.5 to 7 million bags less of Brazilian coffee on the market next year;
  • The frosts damaged mainly the young plantations, less than 5 years old;
  • There are isolated cases of small producers who lost 100% of their crops, reports of frost in areas above 1000 m and there are plantations where the plants were totally affected (from top to bottom);
  • Another point of attention is that even the crops that did not burn, the ones that were exposed to intense cold may have problems in flower survival;
  • It is a consensus that the potential for the 2022 harvest will be low, which is already lower because of the off-cycle year, water shortages in recent months and now the frost;
  • On Monday SOMAR Meteorologia informed that in the previous week it rained 0% in Minas Gerais region;
  • There are forecasts for the advance of even stronger polar air that should reach between 07/29 and 08/01 the South of Minas and Mogiana regions, for which moderate frost conditions and potential for further damage may happen. Part of the Cerrado may also be affected, with less frost risk. The 30th and 31st are the days of greatest risk.

Arabica Duro type 6/7 was quoted above R$1000/bag, varying between regions. An increase of 200 to 300 reais per bag, in relation to previous weeks. The current minimum wage in Brazil is R$1039.00;

  • The harvest in the Zona da Mata is nearing its end, with about 80 to 90% of the region’s crop harvested;
  • With the surprising highs and unpredictability of the market, some exporters left the market on Wednesday and Thursday;
  • Coffee growers are very cautious and attentive to frost;
  • Those affected by the losses are calculating the loss and worried about future delivery commitments;
  • The warehouses in the Zona da Mata are nearly full;
  • With the expressive highs, there was almost no business in FOB export.

The logistics scenario continues to be challenging. There is a lack of space on vessels, low container stocks, and exorbitant freight rates. Shipping lines are releasing containers a few days before the deadline, making it impossible to meet the deadline sometimes. Hamburg Sud and MSC have shown greater restrictions compared to previous weeks.

People who received the first dose: +93 million (44% of the population)
People fully vaccinated: +36.5 million (17.25% of the population)
Cases: + 19.524 million
Deaths: + 547,000

Let’s keep believing and investing in the coffee culture!
Take care,
Atlantica Coffee Team

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