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CEPEA: Arabica Coffee Sees Significant Boost in Futures Prices on International and Brazilian Market in September

By: Alexis Rubinstein, Managing Editor - Coffee Network

CEPEA: Arabica Coffee Sees Significant Boost in Futures Prices on International and Brazilian Market in September

 
Alexis Rubinstein
Managing Editor
alexis.rubinstein@stonex.com

CoffeeNetwork (New York) – The latest report from Brazil’s Center of Applied Economics (CEPEA) notes that the external and, consequently, domestic prices of Arabica coffee had a significant increase in September, especially during the second half of the month. The momentum came from supply-related concerns. The small crop in Brazil in 2021/22 and the impacts of frost and dry weather on production in 2022/23 have been concerning agents about the balance between supply and demand in 2021 and 2022. So far, significant flowerings have only occurred in Garça (SP) and in the Matas de Minas (Zona da Mata). In the other areas surveyed by Cepea, there was also flowering, but on a smaller scale. The main flowering should occur after a greater volume of rain. In September, rainfall was generally very low to favor the recovery of crops and raise soil moisture. In early October, rains were again recorded, but greater volume is still needed for the recovery of coffee plantations and maintenance of flowering. According to Inmet (National Institute of Meteorology), in September, rainfall volumes in Marília (Garça/SP) and in Londrina (PR) totaled 55.2 mm and 43.4 mm, respectively. In Franca (Mogiana/SP), Varginha (South of Minas) and Caparaó (Matas de Minas), 29.4 mm, 29 mm and 10.2 mm, respectively. As for Cerrado Mineiro, no rain.

Given this scenario, at the end of September, the external futures returned to trade close to 200 cents per pound on the New York Stock Exchange (ICE Futures), levels not observed since 2014. For the entirety of the month (between August 31st and 30th September), however, the December/21 contract devalued by 0.7%. In Brazil, producers were relatively retracted in the last weeks of the month, reinforcing the rise in domestic prices. Thus, the CEPEA/ESALQ Indicator of the Arabica type 6 operated several days above BRL 1,100/60 kg bag, reaching, on September 28, the highest real daily level since September 12 January 2012, when closing at R$ 1,146.61 / bag. From August 31 to September 30, the increase was 52.71 reais per bag (or 4.8%).

Robusta prices also rose strongly In September. The CEPEA/ESALQ Type 6 Indicator sieve 13 closed on September 30th at R$ 825.86/bag, an increase of 134.85 reais per bag (or 19.5%) compared to August. This was the biggest actual closing since January 19, 2017. As for the robusta 7/8 type, there was increase of 134.45 reais per bag (or 19.8%) from August 31st to September 30th. The variety's prices were driven by the external gains, due to greater national demand and by the seller retraction. On the London Stock Exchange (ICE Futures Europe), the November/21 contract had a 7% gain from August 31st to September 30th. The  external futures, in turn, were influenced because of concerns about the global supply of coffee in 2021 and in 2022 and due to logistical difficulties faced in other robusta exporters, like Vietnam and Indonesia.

In the national spot, most sellers were retracted, while demand remained firm, which made it difficult to close deals in the country. Due to the appreciation of robusta this year, growers are getting more resources, even with the lower sales volume. Producers must wait for the best development of the 2022/23 crop - both Robusta and Arabica – to return with more effectiveness to the spot market. In the countryside, the weather continued to be drier in September in Espírito Santo and in Rondônia, worrying agents. Although the development of the robusta has not been harmed, a greater volume of rain in the coming months would be ideal for the flower setting and for good development of cherries.

Alexis Rubinstein

 

  • Coffee

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