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Santos, Friday, October 23, 2020
We had another week with the coffee market on hold. Sparse rains fell in the various Brazilian coffee producing regions, but still irregular and, mainly, insufficient. This pattern is expected to continue in the coming days.
Coffee growers already take for granted the drop in production in the Brazilian harvest next year. Our 2021/2022 harvest was already projected to be smaller than this year, due to the biennial production cycle of our arabica. In one year, coffee plantations wear out with a larger harvest and in the following year they produce less in a process of recovery and strength restoration of coffee trees.
In addition to the natural wear and tear of the production park, after the redoubled effort in a high cycle year, the adoption by many coffee growers of the zero-harvest strategy, with the objective of reducing costs in a year that would have low production. This year, with the prolonged drought and high average temperature, we have a good number of producers who are opting for late pruning.
It is also necessary to register that, in large part, the new coffee plantations were lost, from the newly planted to those up to two years old, which in the next year would help producers to have a slightly higher low-cycle crop.
The consequence of the situation of prolonged drought and high temperatures, above the average, in a year of high harvest, which eroded the coffee park, is that in 2021 we will have a bigger, more severe break, and a smaller area in production.
We are approaching the end of October, the rains have not yet normalized, temperatures will rise more and more, increasing evaporation, and the water deficit remains significant. The damage is done, but it can still increase. Only next March will we be able to measure losses more accurately.
Uncertainties with the gradual arrival of rains over Brazilian coffee plantations are driving operators at ICE Futures US in New York to take more cautious action, putting the coffee market on hold. Daily information on scattered, irregular rains here in Brazil brings insecurity to operators. Many do not know coffee production and imagine that the rains solve everything. Also, information about the worsening of the covid-19 in Europe, with the arrival of a second wave, blurred the horizon. Now technicians are already saying that the lethality of covid-19 has dropped a lot, which may lead to minor restrictions on the movement of people. In this context, operators are only interested in the short term, in the day-to-day operations.
The Brazilian physical market remained calm, practically paralyzed, with few deals closed. He worked like that for the past week and kept the same calm this week. Most producers continue to wait for the rains to regularize before deciding what to do with their coffee lots. The bases offered by buyers, only follow the rise and fall of ICE and dollar prices against the real. They still don't attract salespeople.
Unlike traders on the stock exchanges of the future, coffee growers know well what is happening in coffee plantations. They also accompany the sharp rise in inputs and the fall in the value of coffee when compared to the price of soybeans, corn and at-bo. They will wait for a clearer scenario and better prices to help sustain their crops in 2021, when production will drop.
Until the 22nd, October shipments were 1,164,053 bags of arabica coffee, 296,628 bags of conillon coffee, plus 61,556 bags of soluble coffee, totaling 1,522,237 bags shipped, against 1,749,109 bags on the same day in September. Up to the same day, requests for issuing certificates of origin for shipment in October totaled 3,010,874 bags, against 3,166,083 bags on the same day of the previous month.
The New York Stock Exchange - ICE, from the closing of the 16th, Friday, until the closing of today, the 23rd, fell in contracts for delivery in December next 165 points or $ 2.18 (R $ 12.27) per bag. In reais, quotations for delivery next December at ICE closed on the 16th at R $ 800.57 per bag, and today on the 23rd at R $ 786.02. Today, Friday, for contracts for delivery in December, the New York Stock Exchange closed with a low of 110 points.
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