ICE coffee bumps again into strong fundamental pressure



The coffee market is testing supports again on ICE Futures U.S. amid strong fundamental pressure. The advance of the Brazilian record crop keeps weighing against coffee prices on the New York exchange. For this reason, the international price curve remains flat and vulnerable to testing new funds.

This logic is sometimes broken by some climate fears or change in the mood of the financial market. Climate maps do not indicate a risk of intense cold for coffee crops in the coming few weeks, which perhaps explains the much calmer stance of funds. From the financial viewpoint, investors are going through a moment of doubt. If, on the one hand, they want to believe in the resumption of economic activity, on the other, it is hard to ignore the fear of a second wave of COVID-19.

In view of these doubts, uncertainty prevails. That is why coffee has found strong difficulty in sustaining gains, and the September/20 position closed Wednesday (15) at 97.20 cents per pound. The market flirts again with important supports and bottoms.

ICO indicates 4.7% decline in global shipments in 2019/20 season

Global shipments totaled 10.49 million bags last May, according to data from the International Coffee Organization (ICO). That means a 14.6% decline from the same month last year. In the ICO’s business season, which started last October and reached the eighth month in May, world shipments amount to 83.81 million bags, down 4.7% from 87.96 million bags in the same period of the previous season.

 Arabica exports fell 8.6% in the 2019/20 season, totaling 52.14 million bags. Negative highlight on the 9.6% decline in shipments by Brazil, which accumulates 26.23 million bags. Unlike arabica, shipments of robusta increased by 2.5% in the period and totaled 31.67 million bags.

The ICO’s composite price fell again in June, hovering around 99.05 cents. If compared to the immediately previous month, there is a decrease of 5.2%. In comparison with the same period last year, the decline is only 0.9%. The market remains weak in July, with the composite price currently at 99.09 cents.

Physical market on sidelines, except for conillon, which went up

The internal physical coffee market has operated at a slow pace, with business involving small lots and concentrated on localized interests. However, as the crop is large, the sum of these small lots ends up generating a good volume of sales, which ensures liquidity to the external flow. Physical coffee prices fluctuated little last week, given the lack of direction of the main variables (ICE and dollar).

Good cup from the south of Minas is pegged at BRL 490 per bag in the physicals. Even with the dollar helping, this description has difficulty in recovering the level of BRL 500 a bag. Cerrado’s fine coffee, on the other hand, is around BRL 515 a bag and does not get close to the price of BRL 535 a bag reached at the beginning of the month.

The weakest cups are also walking on the sidelines. Rio cup with 20% of defects in Zona da Mata de Minas is around BRL 370 a bag. Conillon coffee is the only one that shows some firmness, finding support from a higher dollar and aggressive foreign demand. Type 7 from Espírito Santo is trading at BRL 350 per bag.