KCNY and Currency
NY ICE had a busy week, with options expiring on Wednesday (12) and the approach of the July/24 delivery period, which starts on the 20th, intensifying rollovers. As a result, the September/24 expiration date became the most liquid and showed volatility of 1,345 points over the week, with a low of 216.10 and a high of 229.55. The market fluctuated a lot on a daily basis throughout the week and ended the week slightly down at 224.40.
In terms of fundamentals, the global supply of coffee continues to be a concern and a bullish factor. The weather in Vietnam and its impact on the next crop is still a key issue and the progress of the 24/25 harvest in Brazil remains on the radar. It is estimated that the arabica harvest has already exceeded 30%, although it is not possible to see this volume being traded yet. On the other hand, we have crop estimates such as those from the USDA, which presented 69.9 million 60-kg bags as its production estimate for the 24/25 harvest in Brazil.
Prices for the July/24 maturity since 01/01/24. Source: Barchart.
On the exchange rate, the dollar remained between R$5.3360 and R$5.4153 and the real continues to lose strength against the dollar. On Wednesday (12), the US Consumer Price Index (CPI) was released, which remained stable in May, lower than expected, but even so prices soared, given the domestic scenario of fiscal instability. In the US, the Federal Reserve kept interest rates between 5.25% and 5.5%.
On Tuesday (11), Cecafé released its report on coffee exports in May/24, which totaled almost 4.397 million 60 kg bags. Of these, 868,000 bags were conilon. This export volume represents an increase of more than 1.949 million bags compared to the same period in 2023.
Last Friday (07), the Commodity Futures Trading Commission (CFTC) released a report on the positioning of Traders in the market for the week ended Tuesday (04), who increased their net long balance for the third week in a row. The funds showed a long balance of 46,543 lots, representing an increase of 2,756 lots compared to the previous balance of 43,787 lots on May 28. This Friday (14) the report with the data for the close of last Tuesday (11) should be released.
Certified stocks ended this Friday (14) totaling 815,031 60 kg bags, representing an increase of 103,160 bags over the last month. There are currently 50,264 bags pending approval.
SEPTEMBER/24: Min: 216.10 | Max: 229.55 | Last: 224.40
BRL/USD: Min: 5.3360 | Max: 5.4153 | Last: 5.3802
*Data as of the completion of this report
WEATHER
The last few days of fall 2024 should maintain the typical characteristics of the season: sunny days and mild temperatures during the night and early morning.
No cold fronts or polar air masses are expected to arrive in the coffee-growing regions over the next few days. The cold front that will hit southern Brazil will not move to the southeast.
No rain is forecast for the week.
DOMESTIC MARKET and FOB
The domestic market is suffering a lot from the devaluation of the Brazilian real versus the daily fluctuations in NY ICE prices. However, the market as a whole is in short supply. Sellers remain withdrawn and capitalized, while buyers are buying out of necessity. In fact, market prices are very high and historic for this time of year. On the FOB, caution over the development of the bean’s screen size continues to be the order of the day and the difference in price between MTGB and large beans of the same quality is as much as 15 cents per pound. The differentials for all qualities of large beans continue to close.
The requests from sellers in the domestic are as below:
Strictly soft good cup running screen was traded at R$ 1,330.00
Strictly soft fine cup running screen reached R$ 1,400.00
Rio Minas: Running screen keeps being negotiated between R$ 1,150.00 and R$ 1,180.00 depending on low grades and screen size percentage.
600 defects reached R$ 1,220.00
LOGISTICS
We haven’t had any schedules canceled due to a lack of food grade containers, but changes to deadlines and the opening of gates at terminals to receive shipped units is still a challenge that almost always results in extra costs for exporters, both in Santos and Rio de Janeiro.
- According to A Tribuna, the Port of Santos’ capacity to store and handle containers is under threat due to the continuous growth of operations, inefficient planning over the last decade and delays in releasing new areas. Entrepreneurs point out that the port is almost reaching its capacity limit, facing space problems in the terminals. The warning comes from the National Center for Transatlantic Navigation (Centronave), which represents shipowners.
- According to the Instituto de Engenharia portal, engineers and representatives of transport companies are warning of the need for the port sector to consider multiple solutions and adopt a long-term vision for land access to the Port of Santos (SP). They point out that the current scenario is already worrying and could get worse if there are no decisions and planning for the execution of works that are still in the study phase or have been under discussion for years.
Atlantica Coffee Team
Disclaimer:
This analysis report aims only to provide information about the coffee market, based on internal and public sources, valid at the time of its dissemination. It does not aim to guide recipients in making any decisions, which are therefore solely the responsibility of the recipient. Atlantica Coffee is exempt from any liability arising from direct or indirect losses.