KCNY and Currency
Throughout the week, the coffee market traded within a range of just over 900 points in the July/23 contract. The weather is still being watched cautiously by the coffee market, as well as expectations for the 23/24 crop, even though the arabica harvest is in its early stages.
On Wednesday, the US Consumer Price Index (CPI) data came in below expectations. On Thursday, the Producer Price Index (PPI) showed an increase of 0.4% in April compared to March. These indicators signal that inflation is losing strength in the United States, directly impacting the exchange rate.
Also on Wednesday, Cecafé released the April/23 export report, which showed that coffee shipments for the month totaled 2.722 million 60kg bags, a 10.3% decrease compared to the same period in 2022, when they totaled 3.034 million bags.
NY ICE certified stocks continue to decline, totaling 646,385 60kg bags on Thursday (11). A year ago, stocks were around 1.1 million bags, representing a drop of just over 457,000 bags. No bags are currently pending approval.
The week was marked by volatility in coffee prices on the NY stock exchange, breaking the 190 cents mark for the July/23 contract. The harvest for the 23/24 crop of arabica has already begun, but greater progress is expected from June onwards, so domestic supplies remain limited, providing support to prices in NY ICE. Other fundamental factors affecting prices include the decrease in certified stocks and slower Brazilian exports. In terms of exchange rates, the direction of US interest rates remains a determining factor, and discussions about raising the US debt ceiling were on the agenda for the week. Internally, the change in Petrobras’ pricing policy and fiscal framework were the most observed factors.
The National Supply Company (CONAB) estimates that coffee production for the 23/24 crop in Brazil will be around 54.74 million 60kg bags, compared to 50.92 million bags in the 22/23 crop. This estimate was not well received by the market due to its extremely bearish outlook.
Meanwhile, the Green Coffee Association (GCA) announced that it will no longer publish monthly stocks of green beans in the country. In March, stocks decreased by 88,690 bags compared to February/23. According to the latest report published by Cecafe, Brazilian coffee exports to the US from January to April/23 totaled 2,050,947 bags, compared to 2,538,858 bags in the same period of 2022.
Certified stocks on NY ICE continue to decline, totaling 629,810 60kg bags as of Friday (19th), with no pending bags awaiting approval.
JULY/23: Min: 182,10 | Max: 194,40 | Last: 192,00
BRL/USD: Min: 4,8860 | Max: 5,0020 | Last: 4,9940
*Data as of completion of this report.
WEATHER
After the recent influence of the polar air mass in the Southeast region, causing a decline in temperatures, the continental dry air mass is expected to prevail in the coming days, which may hinder the arrival of cold fronts and lead to a significant drop in relative humidity.
According to information from the American Meteorological Agency, the sea surface temperature off the coasts of Peru and Ecuador has increased rapidly in the last 30 days, indicating an El Niño situation. Therefore, in the second half of the month, the coffee-growing regions can expect a lack of rainfall and a slight rise in temperatures.
There is no rain forecast for the week.
DOMESTIC MARKET and FOB
Both in the domestic market and in the FOB market, the week saw low liquidity in business transactions, with only sporadic demand. The expectation of the new harvest’s start and the price gap between sellers and buyers remain important factors.
The ideas of sellers in the domestic market are as follows:
Strictly soft good cup running screen: seller close to R$ 1.070,00
Strictly soft fine cup running screen: seller close to R$ 1.100,00
Rio Minas:
Running screen with 25% low grades close to R$ 900,00
17/18 around R$ 1.050,00
14/16 around R$ 1.020,00
600 defects: close to R$ 950,00;
LOGISTICS
According to a statement issued by the Union of Auditor-Fiscal Officers of the Federal Revenue in Santos, starting next Tuesday (23), the Auditor-Fiscal Officers will be in a state of mobilization on Tuesdays, Wednesdays, and Thursdays, with planned protest days at the main units of the Federal Revenue across the country, including the Customs Office of the Port of Santos.
According to Forbes, Brazilian agribusiness exports reached a record of $50.6 billion in the first quarter of 2023. This volume represents a growth of 4.3% compared to the same period in 2022, when sales were $48.53 billion. Agribusiness accounted for nearly half of Brazil’s total exports in 2023, with a share of 49%. In the previous year, agribusiness’s share in Brazil’s export agenda was 47.7%.
In general, shipping companies have not encountered issues with container clearance or allocation restrictions on ships.
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.