Brazilian coffee sales advance to 40% of current harvest, despite caution over drought

RIO DE JANEIRO, BRAZIL – The sale of coffee from the 2021/22 season, with harvest underway in Brazil, reached 40% of potential production by June 8, an advance of 6 percentage points over last month’s survey, despite greater producer caution over concerns of a breakdown due to severe drought, assessed on Friday consultancy Safras & Mercado.

The percentage of sales is higher than in the same period last year when it stood at around 34% of the crop and is also well above the average of the past 5 years for this time (26%).

According to Safras & Mercado consultant Gil Barabach, the justification for this performance is the rise in prices, which began at the end of last year. But now producers “cut back” and reduced the sale pace of the Brazilian 2021 harvest, the analyst pointed out.

“This behavior has been noticed since the start of the year, but it has gained momentum over the past two months. The bad weather led to concerns of failing to fulfill the anticipated sale contracts. And the rise in prices has increased the bet for a hike. All this ultimately drove sellers away from the market,” he commented.

Coffee producers in Brazil, the largest global supplier of the commodity, are trying to renegotiate sales contracts with exporters and traders at higher prices, sparking fears of default in the industry, according to market professionals.

According to Barabach, from Safras, producers should continue to manage their sales flows, particularly in this transition period between crops.

“Until the spring and the flowering of the 2022 harvest, the market should continue to favor the strategy of lengthening positions, staggering sales. The recent adjustment in the price line and the gradual advance of the new supply in the market has not been enough to change the seller’s behavior, at least not yet,” said the consultant in a note.

By early June, producers had harvested about 20% of the current crop’s production.

Arabica sales are still the highlight, reaching 43% of the crop, well above the average for the period, which is around 27%.

“Conilon sales gained extra pace during the last month of May, due to the harvest progress and also due to the good demand for Conilon by exporters and the local industry,” he said, noting that the business reached 34% of the harvest.

The commercialization of Arabica and Conilon coffee from the previous cycle reached 95% of the total harvested up to June 8, according to the consulting company.