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Weekly report – Brazilian Coffee Market – June 3rd – 7th 2024

by Jun 7, 2024Market report0 comments

KCNY and Currency

On the New York Stock Exchange, arabica coffee prices showed a lot of daily volatility throughout the week. For the July/24 expiration date, coffee was quoted between 220.90 and 239.80, fluctuating by 1890 points over the week. On Tuesday, the market oscillated 1065 points in a bullish movement and on Friday it registered 1050 points of oscillation in a bearish movement but ended the week up at 224.80.  

The main factor impacting on the rise in coffee prices is concern about the global supply of coffee. The weather in Vietnam is a concern, as is the global supply of Robusta, given that the country is the largest producer of the variety. On the other hand, Brazil, as the largest producer of Arabica, is also paying attention to the weather, which so far is favoring the harvest, given that winter is approaching. The harvest continues to progress in the country, and it is estimated that it has already exceeded 20% for Arabica coffees.   

Prices for the July/24 maturity since 01/01/24. Source: Barchart. 

On the exchange rate, the dollar was quoted at between R$5.2134 and R$5.3278, with the real weakening against the dollar. A stronger dollar combined with higher prices on the NY ICE have a direct impact on higher prices on the domestic market.  

On Monday, the USDA (United States Department of Agriculture) published a report on the forecast for the next Brazilian crop, cycle 24/25. The country’s total production is estimated at 69.9 million 60kg bags, of which 48.2 million are arabica and 21.7 are conilon. A fortnight ago, on May 23rd, CONAB estimated production at 58.8 million bags.  

Last Friday (31), the Commodity Futures Trading Commission (CFTC) released a report on the positioning of Traders in the market for the week ended Tuesday (28), who increased their net long balance for the second week in a row. The funds showed a long balance of 43,787 lots, representing an increase of 2,410 lots compared to the previous balance of 41,377 lots on May 21. This Friday (07) the report with the data for the close of last Tuesday (04) should be released.  

Certified stocks ended this Friday (07) totaling 799,038 60 kg bags, representing an increase of 97,615 bags over the last month. Currently, only 26,883 bags remain to be approved.  

JULY/24: Min: 220.90 | Max: 239.80 | Last: 224.80 
BRL/USD: Min: 5.2134 | Max: 5.3278 | Last: 5.3249 
*Data as of the completion of this report 


WEATHER

The cold front that has passed along the coast of the Southeast over the last three days will leave the weather partly cloudy over the next few days in the Jequitinhonha, Mucuri and Rio Doce valleys, in the north of Espírito Santo, in the south of Bahia and in the Zona da Mata. In the other coffee-growing regions, the sun will predominate both at the weekend and next week.  

Winter will begin on June 20. Therefore, the last days of fall will be sunny in practically all coffee-growing regions, with high temperatures. No polar air masses or cold fronts are expected to arrive in the next few days. Temperatures should remain 2ºC to 3ºC above normal for this time of year.  

No rain is forecast for the week. 


DOMESTIC MARKET and FOB

The domestic market fluctuated a lot due to the weak Brazilian real and the volatility in NY ICE prices, but this does not indicate that there were many offers. Even with the progress of the harvest and the arrival of the first lots of the 24/25 crop, sellers remain capitalized and withdrawn. On the FOB, caution about the development of the beans’ size continues to be the main concern and the differentials for the large ones keep widening. In qualities such as Rio Minas, there was a difference of around 16 cents per pound between MTGB and big beans. 

The requests from sellers in the domestic are as below: 

Strictly soft good cup running screen was traded at R$ 1,380.00 
Strictly soft fine cup running screen reached R$ 1,450.00 
Rio Minas: Running screen reached R$ 1,080.00 for lots with less low grades and bigger percentage of big beans, the other lots were traded at around R$ 1,150.00
600 defects reached R$ 1,200.00 

On Tuesday, June 4, the Federal Official Gazette published Provisional Measure 1227, limiting the offsetting of PIS and COFINS credits with other taxes, a measure that directly impacts exporters and their cash flows. 


LOGISTICS 

Unfortunately, ship delays continue to be a constant factor with a negative impact on operations, resulting in extra expenses. On the other hand, the stock of containers has proved to be sufficient to meet demand. 

Some destinations in Europe already have little remaining allocation on ships leaving in the next 4 to 6 weeks. 

  • The Brazilian Coffee Exporters Council (Cecafé) has criticized provisional measure 1.227/2024, published by the government, which limits the use of presumed PIS and Cofins credits. According to Cecafé, the measure will increase the tax burden and reduce the competitiveness of Brazilian companies in the international coffee market (Source: Globo Rural). 
  • Last week, the Brazilian Coffee Exporters Council (Cecafé) met with representatives of the São Paulo Pilotage to identify bottlenecks that cause ship delays at the Port of Santos. Cecafé, represented by technical director Eduardo Heron and the coordinators of the Logistics Committee, presented the challenges faced by coffee exporters, who depend on the port for 71% of Brazilian shipments. The meeting aimed to better understand the obstacles, from navigation in the access channel to the berthing and unberthing processes (Source: Notícias Agrícolas). 

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.