KCNY and Currency
The penultimate week of May was marked by some initial stability. However, in line with the volatility observed in the previous week, the market continued to show significant fluctuations. One highlight was the variation of more than 10 cents in the price of the coffee futures contract (KCN3), which started the week with an opening at 191 c/lb and reached its lowest point on Friday, dropping to 180.30 c/lb. The volatility has been influenced by the arrival and progress of the new crop harvest, as well as the impasse surrounding the debt ceiling in the United States.
In the European scenario, economic activity data showed a decline, as expected, but fell below market expectations. In addition, inflation rates were also higher than anticipated, which generated uncertainties regarding interest rate policies in Europe, given that economic activity remains at high levels.
In this context, the dollar found a base to strengthen against European currencies, which contributed to the volatility observed in commodities. The US Treasury Secretary reiterated her position that there will not be sufficient funds for financial obligations starting from June 1st, unless the debt ceiling is raised. On Thursday, there was a new development indicating that Joe Biden and Kevin McCarthy are reaching an agreement to raise the US debt ceiling for two years.
On the domestic front, the focus of attention throughout the week was on the Fiscal Framework, which was approved by the House and moved to the Senate after voting on its amendments on Tuesday. The Fiscal Framework went through the process with no major changes in the House, maintaining its main rules. One of the most notable moves was the removal of the point that allowed for spending growth above the ceiling next year, regardless of national revenue.
Certified stocks continued to decrease, with a cumulative weekly drop of 20,032 bags, totaling 609,778 60 kg bags in stock as of Thursday, May 25th. This number represents the lowest point of the year so far, with an accumulated annual decrease of 480,377 bags.
JULY/23: Min: 180,30 | Max: 193,75 | Last: 180,30
BRL/USD: Min: 4,9358 | Max: 5,0438 | Last: 4,0060
*Data as of completion of this report.
WEATHER
The polar air mass that acted in the South and Southeast regions of Brazil in recent days even caused frost in Minas Gerais and Sao Paulo states, but without causing damage to the coffee regions.
A new cold front arrives in the Southeast region on Tuesday and may cause light rain in South Minas, Mogiana and Garça. There is no forecast for a sharp drop in temperatures.
There is no rain forecast for the week.
DOMESTIC MARKET and FOB
In the domestic market few deals were reported in the week, despite several quotes. In the FOB, the market continues with narrow margins, but with some business reported.
The ideas of sellers in the domestic are as below:
Strictly soft good cup running screen: seller close to R$ 1.000,00
Strictly soft fine cup running screen: seller close to R$ 1.040,00
Rio Minas:
Running screen with 25% low grades close to R$ 900,00
17/18 around R$ 1.120,00
14/16 around R$ 1.100,00
600 defects: close to R$ 910,00;
LOGISTICS
DP World Santos introduces a new regular coastal shipping route, operated by the shipping company Login, with direct service to the southern region of the country and a biweekly frequency. This new service enhances the transportation capacity between the South, Southeast, North, and Northeast regions of Brazil. There have been no reports of shortages of food grade containers, and ships departing in June have not yet encountered allocation restrictions.
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.