The increase in physical availability stimulates sales, but growers are scared by the decline in price and end up retracting. The fact is that good cup from southern Minas Gerais has accumulated nominal losses of 18% in the last 30 days, given the pressure with the arrival of Brazil’s 2023 crop. And the higher-than-expected production reinforces the idea of a full crop, especially of arabica, increasing the seasonal effect against prices. Growers, who took a while to understand the market change, seem to be assimilating, albeit timidly, this new reality. On the other hand, they find cautious buyers, who avoid carrying very heavy positions, which also contributes to a steady flow of sales at the start of the 23/24 season.
The SAFRAS survey pointed to a commitment by growers of 32% of the potential of Brazil’s 2023 crop up to July 11. This percentage involves, besides physical sales, also barter, locks with trading companies, and negotiation rollovers with the past crop. Even with good progress compared to the previous month, the flow of sales remains below the same period last year, when it reached 39% of production. This is below the five-year average for the period, which is around 38%.
Arabica sales reach 30% of production, well below the same period last year and the five-year average, both at 39%. Many growers have concentrated efforts to prepare coffee for delivery and liquidation of forward sales, which inhibits new sales. The low price also ends up encouraging growers to hold coffee for further negotiation. It is necessary, however, to pay close attention to the financial issue, especially high interest rates, be it in the selling decision (taking advantage of the good performance of fixed income) and, especially, in the resort to credit lines to postpone coffee negotiations, as the cost of money is too expensive. To what extent is it worth borrowing money to postpone coffee sales?
In the case of conillon, the advance of the harvest and the slowdown in the external price curve of robusta in London ended up bringing more sellers to the market, which explains the good performance of sales last month. Sales are at around 35% of the 2023 crop, still slightly below the 37% in the same period last year and below the five-year average of 38%. The strong decline in the price of arabica, especially for weaker cups, is beginning to attract interest from the local industry, which reduces the flow of conillon purchases and reinforces bearish signals.
Sales of the 22/23 crop (July/June) are still delayed in this final stretch of the business season. The lower price keeps sellers on the defensive, while buyers shift focus to the new crop. In this sense, the SAFRAS monthly business survey indicates that up to July 11, coffee sales from Brazil’s 22/23 crop were at 97% of production, up 3% compared to the previous month. The sales flow is slightly below the same period last year (98%) and below the average of the previous 5 years, which points to 97% of the production committed by growers in this period of the year. Arabica sales reach 96% of production, down from last year (97%) but in line with the five-year average. The sales of conillon correspond to 98% of the expected production. Sales had already been finished in the same period last year, while the five-year average is around 99% average.
