Porto Alegre, February 28, 2020 - Despite fears surrounding the spread of the coronavirus, the international coffee market, marked by the New York Stock Exchange (ICE Futures US) for arabica, closed February with a positive balance. In the Brazilian physical market, prices also advanced, driven by NY and the dollar, which reached record highs.
The apprehension with the evolution of the coronavirus and its effects on the economy of China and the world affected the stock exchanges and the future markets of agricultural commodities. Fear leads to capital flight from these riskier markets and brings down prices. It was what was seen in February. Coffee was also affected, but, as indicated by SAFRAS & Mercado consultant, Gil Barabach, was less vulnerable.
So much so that in NY, Arabica has fluctuated lately (until this Thursday, 27th) around the important $ 1.10 a pound weight line. According to Barabach, in the midst of the comings and goings and all the stress caused by the new coronavirus, the May position in NY maintained part of the recovery and ended up sustaining this 110-cent line. “It is true that he does not show the strength to advance far beyond this level, but, on the other hand, he manages to maintain a good distance in relation to the important psychological line of 100 cents, which is already quite positive. In general, the market raises the level of performance at ICE in NY again ”, he comments.
He warns that the pessimism caused by Covid-19 should serve as a limit to earnings at ICE in NY. “Companies are beginning to quantify the impact of the virus on their results and this tends to have a negative effect on the markets. The new stage of the epidemic, which is spreading more strongly outside China, should continue to affect the mood of the operators, ”he says. The commodities market ends up reflecting all this movement. The CRB index has already accumulated losses close to 10% since the beginning of the year. "And, of course, this ends up interfering in the progress of the coffee market on the North American stock exchange", he believes.
Regarding the fundamentals, Barabach believes that the fundamental environment of coffee remains relatively quiet. “The climate continues to be favorable for coffee crops in Brazil, which supports the promise of a record Brazilian harvest in 2020. Conilon news remains very positive, both in Rondônia and Espírito Santo, which should help consolidate the new level Brazilian productive system ”, evaluates the consultant. He recalls that throughout March, towards the end of the month, it is normal to start to appear some lots of early conilon on the market.
Meanwhile, external demand is on the defensive, given the uncertainty surrounding global markets. The strong flow of shipments from Brazil over the past few months guarantees a good supply of Brazilian origin, says Barabach. The tendency is for the buyer to extend his stock in Brazil, while waiting for the arrival of the 2020 harvest.
In the monthly balance from February to the 27th, the May contract for Arabica coffee in New York accumulated an increase of 4.6%, having increased from 104.90 cents per pound at the end of January to 109.75 cents (closing of 27/02). Robusta coffee on the London Stock Exchange did not perform as well, with the May contract dropping from $ 1,342 to $ 1,289 a ton.
In the Brazilian physical market, prices also rose, as well as in New York. In addition to the support of the stock exchange, the dollar reached records in the month, supporting the quotations in reais. The commercial dollar rose 4.4% in February until the 27th, closing Thursday at R $ 4.477.
Thus, hard arabica coffee with 15% of pickings in the south of Minas increased from R $ 455.00 per bag at the end of January to R $ 510.00 per bag, up 12.1%. Conilon type 7, in Vitória, Espírito Santo, rose from R $ 300.00 to R $ 308.00 a bag, accumulating a gain of 2.7%.
The SAFRAS consultant describes that the physical market improves the price level, but is still very calm in business. “The demand remains balanced and selective for quality, given the increased interest in better drinks, especially the finest coffees. The producer maintains a defensive posture, well capitalized and with little coffee available. In this sense, the tips remain very distant, which hinders business ”, he says. Movements are limited to sporadic lots, guided by the need for cash flow from the producer or in view of the need for a shorter exporter, in a typical “hole market”, he concludes.
Lessandro Carvalho (email@example.com) / Agência SAFRAS
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