KCNY and Currency
The week was a busy one for coffee prices on the New York Stock Exchange: on the May/24 expiration date, prices were between 179.35 and 188.40 cents/lb, with a range of 905 points over the week. Several factors favored the volatility of prices, such as concerns about the supply of robusta, given the crop failure in Vietnam and the conflicts in the Red Sea, as well as some concern about the La Niña phenomenon and the arrival of the winter season in the southern hemisphere. With robusta on the rise, the arbitrage between New York and LONDON remains tight, strengthening demand for low arabica. Technical factors also helped to keep the market above the 180 level, with prices struggling to break through the average of the last 100 days of 181.45.
The exchange rate had a busy week, with the dollar reaching above the R$5.00 level, with a high of R$5.0549 and a low of R$4.9503. The American Central Bank confirmed that there will be 3 interest rate cuts in 2024, while on the domestic front, the Monetary Policy Committee (Copom) announced on Wednesday (20) a 0.5 p.p. cut in the basic interest rate (Selic), from 11.25% to 10.75%.
As of last Thursday (21), certificates of origin had been issued for more than 2.8 million bags that are already being shipped this March, a volume that should bring March/24 exports to a total higher than the same period in 2023, which totaled 3.115 million bags. Conilon exports continue to be strong and as of yesterday more than 493,000 bags had already been shipped.
On Friday (15), the Commodity Futures Trading Commission (CFTC) released the Traders’ Position Report for the week ended Tuesday (12), in which funds increased their long position for the second week in a row by 1,387 lots, totaling 34,029 against a balance of 32,642 the previous week.
Certified coffee stocks on NY ICE continue to recover and exceeded 550,000 bags for the week. On Friday (22) stocks closed at 568,097 60 kg bags, representing an increase of 100,272 bags since the 14th. There are currently 87,657 bags pending approval.
MAY/24: Min: 179.35 | Max: 188.40 | Last: 184.85
BRL/USD: Min: 4.9503 | Max: 5.0549 | Last: 4.9961
*Data as of the completion of this report
WEATHER
The cold front arriving this Friday in the southeast of Brazil is expected to remain partially stationary for the next few days between the states of São Paulo and Minas Gerais. It is the first cold front of the fall season, which began on March 20 and will end on June 21.
Climate forecast models show that during the fall there will be a transition from the El Niño phenomenon to La Niña, which should begin to act from winter onwards. In a neutral situation, we can expect a greater frequency of cold fronts along the coast of the Southeast and mild temperatures in the coffee-growing regions.
Rain forecast for the week:
South Minas region: between 70 and 80 mm.
Zona da Mata region: between 40 and 60 mm.
Cerrado region: between 50 and 60 mm.
Alta Mogiana region: between 70 and 80 mm.
Garça region: between 70 and 80 mm.
DOMESTIC MARKET and FOB
The physical market fluctuated a lot this week, given the movements of the dollar and NY, even though the bases of buyers and sellers remain mismatched. With the rise in robusta prices, qualities such as 600 defects continue to have higher and firmer prices. For rio minas quality, the market continues to be undersupplied and prices are solid. On the FOB, orders for low-grade arabica, such as grinders and 600 defects, are more in evidence, offering the industry alternatives to lower-cost coffees. For rio minas, there is still demand for short-term shipments, despite the reduced demand due to the Ramadan holiday, even with mismatched prices between the ends and the more limited supply. For fine cup and good cup, demand remains very low, with buyers waiting for the pressure of the approaching crop on prices, also the market remains slower, with some short-term business reported and a slightly larger volume for shipments from June/24 onwards.
The requests from sellers in the domestic are as below:
Strictly soft good cup running screen: seller around BRL 1,025.00
Strictly soft fine cup running screen: seller around BRL 1,050.00
Rio Minas: Running screen with 25% low grades around BRL 920.00
600 defects: around BRL 910.00
LOGISTICS
The ports of Santos and Rio de Janeiro, the main ports used for coffee shipments, continue to be heavily affected by ship delays. Most of the time, shipowners claim that these delays are the result of operational restrictions at previously scheduled ports – especially those in the south of the country.
Low stocks of food grade containers also continue to have a negative impact on exports at both ports.
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.