KCNY and BRL / USD
KCZ0 oscillated between 103.20 and 108.65, lower than in the previous week. BRL / USD traded between a low of 5.5460 and a high of 5.6493. The real operates this Friday at around 5.61 against the US dollar.
The concern with coffee consumption in view of the resumption of restrictive measures to prevent Covid-19 in important consumer countries, the devaluation of the real against the dollar and the forecast of rains in Brazil are some of the factors that have influenced the market this week.
DOMESTIC AND FOB MARKET
Coffee growers have not assimilated the drop in NY levels and are not eager to sell coffee at market prices (KCNY and USD), as they have capitalized on sales at good prices in previous months. In addition, they are awaiting the definition of rains and many believe that prices will return to evolve positively given the prospects for production challenges in the 21/22 crop.
The coffee flow in some general warehouses in Mogiana and Cerrado is still high, there is little space available and queuing of trucks. In Matas de Minas/Zona da Mata the situation is normalizing. Thus, few deals were made this week, both domestically and abroad.
Ipea’s projection of GDP growth for Brazilian agriculture in 2020 was raised from 1.6% to 1.9%. Coffee and soy were the main commodities that contributed to the increase. The year was of excellent production and commercialization for these cultures in Brazil.
WEATHER
Irregular rains have been recorded in most producing regions since the weekend, extending throughout the week. However, in some locations the accumulated volume is still below the necessary to recover the depleted crops and for a good flowering. This week the temperatures were milder.
Crops still need a good amount of rain to recover from the high production of the 20/21 crop, from the long drought period faced this year, from water lost due to evapotranspiration with the high temperatures recorded in October, from the low water reserve on the ground, etc.
Rain for the weekend is forecast to the main coffee growing regions in the states of Minas Gerais, Bahia, Espirito Santo and Paraná, mainly in Alta Mogiana and Cerrado, but also in Baixa Mogiana, Southern Bahia, Linhares, etc.
MOGIANA AND SUL DE MINAS REGIONS
During this week we spoke with 6 growers, partner of Atlantica, in the regions of Mogiana and Sul de Minas. The respondents reported irregular rainfall in the past few days, between 20 and 80 mm, depending on the region, therefore, there is an expectation of a new flowering within a few days.
In general, they reported that they did not suffer great losses from the drought and that there was no high rate of abortion in the first few blooms, which has been punctual and not very alarming. About 50% of respondents have an irrigation system, which helps to reduce the effects of drought on their properties.
Respondents estimate that their production on 21/22, an off-cycle year, will be between 20 to 50% less than the current crop, depending on the region and production system. However, they are still waiting for the next rains, which are very important for a more realistic definition of the production potential and thus define their sales strategies.
INTERNATIONAL LOGISTICS
The lack of containers and reduced space on vessels for most routes and shipowners are worsening and should be extended to the coming months. In this scenario, it is essential to act in advance in bookings.
We reinforce the request for customers to send Shipping Instructions in advance and to certify with the ship-owner when closing the freight contract if there are guaranteed units.
Lets keep believing and investing in the culture of coffee so together we can keep moving coffee forward!
Stay well,
Atlantica Coffee Team