Cepea, March 3, 2020 – After dropping sharply in January, arabica coffee prices rose a staggering 10.2% in the Brazilian market in February. Between January 31 and February 28, the CEPEA/ESALQ Index for the coffee type 6 (delivered in São Paulo) increased 48.61 Reais/bag, closing at 522.42 BRL (116.30 USD) per 60-kilo bag on February 28.
The sharp valuation of arabica coffee was linked to both the US dollar appreciation against Real (on Feb. 28, the American currency hit a new nominal record) and the international prices for this variety. As regards arabica Futures, valuations reflected technical movements and concerns about the unfavorable weather in Brazil in the second semester of 2019, which, according to estimates from the sector, should result in a large 2020/21 crop, but not in a new record (compared to the 2018/19 crop, which was a record).
The agents consulted by Cepea have opposite beliefs about the next Brazilian crop. Some of them believe that the flower and fruitlet drops in 2019 should reduce the harvest – although the crop may total 60 million bags. Others, however, believe the high rains observed since November, mainly during the beans filling stage, helped crops to recover and should increase yield at coffee processing, which may boost the volume produced in 2020/21.
As regards liquidity in the Brazilian spot market, despite the increase, the trading pace was slower in February than that between November and December 2019. Most coffee growers have no cash flow needs (due to the sales in the last months) and should wait for sharper valuations – or the harvesting to be closer – in order to close new deals.
Besides, the coffee volume remaining is very low, mainly of higher quality arabica. In general, the amount of arabica traded this season (2019/20) is near 85% of the total in all the regions surveyed by Cepea this month (until Feb. 14).
ROBUSTA – Robusta coffee prices remained firm in the Brazilian market in February. Between January 31 and February 28, the CEPEA/ESALQ Index for the type 6, screen 13, Espírito Santo State, rose a slight 3.24 Reais per bag (1%), to 312.92 BRL/bag (69.66 USD/bag) on Feb. 28. Quotes were underpinned by the international valuations for this variety.
In Brazil, liquidity was higher in the market of robusta than in the arabica most part of the days, despite being lower than in late 2019. Agents believe robusta trades may increase in the coming weeks, due to the nearness of the harvesting, which may start in March. Robusta growers need to make cash flow for the harvesting activities and to make room in warehouses in order to stock the 2020/21 crop, which should be large. Thus, the volume marketed (2019/20 crop) until February 14 ranged from 80 to 85% in Espírito Santo and from 90 to 97% in Rondônia.