South American Coffee: Quality, Exchange Rate & Weather

by Safras & Mercado

Quality, Exchange Rate & Weather

The coffee market was taken by a strong movement of recovery of quotes. The fears in relation to coffee quality and its reflections on the flow of shipments from Brazil served as fundamental support to the purchases by funds and speculators. What could be noticed is that in this final straight of operations of exchange between September for December contracts the question of the quality of Brazilian coffee gained more weight, prompting support to prices. Another fact that also helped the highs, connected to the outside Brazilian performance, was the valuation of real against the US dollar. So, a combination of factors that confirms the hypothesis of a more staggered flow of Brazilian sales, raising even the possibility of potential supply bottlenecks. And, at last, speculation about the possibility of delay in the Colombian crop also contributed for such an action. In this sense, international prices jumped, with December expiration in New York moving from 73.00 cents, in early September, to test and later outdo 80.00 early this week. In practice, the market has found support in the liquidation of sold positions by funds and speculators, with such players adjusting a portfolio, which previously held a net balance of almost 18 thousand sold contracts, to slightly less than 8 thousand sold contracts, according to the latest CFTC report, with data up to September 14. The buying performance was sustained, with the sold position likely not only to drop but also to invert the direction already in the next report. In other words, such players will possibly move to a buying profile, given the bold buying performance for the past few weeks, especially in the first two sessions of this week.

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