KCNY and Currency
The week was shorter both on the NY ICE and on the exchange, due to the Memorial Day holidays on Monday and Corpus Christi on Thursday, but even so the market was extremely volatile. Coffee prices on the New York Mercantile Exchange for the July/24 expiry date, still very liquid, were between 219.25 and 236.25. After Monday’s holiday, prices started the following day on a high and fluctuated by 1395 points on Tuesday (28) alone, rising by almost 6%. The arabica market continues to be heavily influenced by the performance of robusta in London, which continues to reach historic highs, given concerns about dry weather and its impact on the next Vietnamese crop, the world’s largest producer of the variety.
In terms of fundamentals, the progress of the harvest in Brazil is putting pressure on prices on the NY ICE, with the weather favoring the harvest. However, so far, the harvested lots have had a high percentage of small beans, which could improve as the harvest progresses, but it is a factor that has generated great caution in the market as a whole. Added to this, the situation in Vietnam has contributed to the uncertain global supply scenario.
Prices for the July/24 maturity since 01/01/24. Source: Barchart.
On the foreign exchange market, the dollar was quoted at between R$5.1380 and R$5.2579, reaching its maximum on Friday, when the core consumer spending price index (PCE) was released, advancing 0.2% in April/24 compared to March, versus the 0.3% expected by the market. The news didn’t have much of an impact, so investors started looking at data from China, with an unexpected industrial contraction, which could be bad for Brazilian exports. In general, the FED, the US central bank, signaled that interest rate cuts should only begin at the end of the year.
According to the International Coffee Organization’s April/24 coffee market report, in March 2024, South American coffee exports rose by 33.1% to 5.49 million bags. Thus, the first 6 months of coffee year 23/24 cumulatively total 33.56 million bags, compared to 26.07 million bags shipped in the first six months of 22/23, representing an increase of 28.7%.
The USDA (United States Department of Agriculture) published a report on Vietnam on Thursday 30, in which they estimate production of 27.85 million bags of robusta for the 24/25 crop in the country, compared to the 28 million bags produced in the 23/24 crop.
Last Friday (24), the Commodity Futures Trading Commission (CFTC) released a report on the positioning of Traders in the market for the week ended Tuesday (21), which increased their net long balance after 4 weeks of reduction. The funds showed a long balance of 41,377 lots, representing an increase of 1,372 lots compared to the previous balance of 40,005 lots on May 14. This Friday (31) the report with the data for the close of last Tuesday (28) should be released.
Certified stocks ended Thursday (30) at 786,366 60 kg bags, representing an increase of 126,608 bags in 30 days. Currently, only 25,275 bags remain to be approved.
JULY/24: Min: 219.25 | Max: 236.25 | Last: 222.35
BRL/USD: Min: 5.1380 | Max: 5.2579 | Last: 5.2382
*Data as of the completion of this report
WEATHER
The cold front that has passed along the coast of southeastern Brazil in recent days has already dissipated along the southern coast of Bahia. The frontal system caused light rain in some cities in the South Minas and Zona da Mata regions.
No new cold fronts or polar air masses are forecast for the next few days. Stable weather in all coffee-growing regions. Climate forecast models show that temperatures should remain above average until late fall.
No rain is forecast for the week.
DOMESTIC MARKET and FOB
The domestic market had a shorter week due to the holidays, but saw intense movements in line with the rise in prices on the NY ICE and the dollar. On the domestic market, the first batches of the 24/25 crop, which has a smaller screen size, are starting to be traded, thus increasing the value of the remaining batches of the 23/24 crop, which has bigger beans. The highs on the NY ICE brought sellers to the market, but with the lows they are more withdrawn, waiting for better prices to return. On the FOB, the 24/25 crop is still undersold for the period, with occasional demand. The market continues to observe the progress of the harvest and the screening issue for this crop. It’s already possible to see a widening of the differential between MTGB and large ones of around 10 cents per pound between them, depending on quality, with sellers cautious about negotiating 17-plus screens for the upcoming crop.
The requests from sellers in the domestic are as below:
Strictly soft good cup running screen was traded at R$ 1,300.00
Strictly soft fine cup running screen reached R$ 1,250.00
Rio Minas: Running screen with 25% low grades close to R$ 1,080.00 for crop 24/25 and R$1,140.00 for crop 23/24, given the percentage of big beans.
600 defects: up to BRL 1,150.00
LOGISTICS
For yet another week, there were no cancellations or postponements due to a lack of equipment, but some shipments were impacted by changes in ship schedules, both in Santos and Rio de Janeiro.
We would like to draw your attention to the limited allocation available on ships departing in June.
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.