Coffee up 10% in New York after new frosts in Brazil

RIO DE JANEIRO, BRAZIL – Frosts in Brazil were once again the main factor in coffee trading on Thursday (22) as prices on the New York Stock Exchange soared for the third consecutive day.

Arabica contracts maturing in September (currently the most traded) surged 10% (1,765 points) in the session, to US$1.9365 per pound.

The cold spell in Brazil’s Center-South dominated investor attention also on Tuesday and Wednesday, rising 6% and 5.5%, respectively. Meanwhile, the December futures settled at US$1.966 per pound.

Pharos Consulting director Haroldo Bonfá said that after underestimating the expected frosts, the market had to make strong position adjustments in the last few days. He said the trend is for speculators to realize the profits obtained with the recent highs, which can pressure prices. However, Bonfá points out that the new cold fronts forecast should contain further price drops.

According to Somar meteorologist Desirée Brandt, a new cold front should hit the country at the turn of the month and cause new frosts. “For now, the forecast models point to a greater chance of frost in the South region, but the occurrence of frosts between São Paulo and Minas Gerais at the turn of the month cannot be ruled out. There is still no indication of temperatures close to or below 0ºC, but the forecast is for thermometers close to 3ºC, which may give rise to mild frosts in several points,” she says.

According to the Price Group, the extent of the damage caused by frost in Brazil is not yet known, but the prospect is for a drop in coffee yields in the country.

Cocoa also closed the day up. The bean lots for September (the most traded at the moment) rose 2.3% (US$52), to US$2.3717 a ton.

According to Dow Jones Newswires, the commodity has been appreciating in growing regions in Nigeria, a major producing country, because of bad weather and the inability of farmers to properly sun-dry cocoa. In addition, according to Price Group analyst Jack Scoville, the market also seems to have absorbed the prospect of increased demand in Europe and Asia and is now working with that scenario.

Barchart international commodities website recalls that the commodity dropped significantly last week. Thus, the last days’ highs were expected.

According to Zaner Group consulting, if investors’ risk aversion continues to decrease, cocoa prices may experience new highs. “The idea that the Delta variant of the novel coronavirus would not have a significant long-term impact on the economy has helped calm tempers over cocoa demand,” it said in a report.

In the trading of frozen concentrated orange juice (FCOJ), September futures rose 2.6% (345 points) on Thursday at US$1.35 per pound.

The international market has been adjusting positions while waiting for more information on frost damage in Brazil, Price Group reported. Researcher Fernanda Geraldini, from the Center for Advanced Studies in Applied Economics (CEPEA), said that the phenomenon’s impact on the crop was limited.

Sugar closed the day down in New York. Demerara contracts for October (currently, the most liquid) fell 0.2% (5 points) in the session, at 17.62 cents a pound.

The market seems to have absorbed the potential impacts of frosts on sugarcane fields in South-Central Brazil. According to the Barchart website, investors are now turning to other fundamentals, such as the prospect of increased supply in the country.

Last week, the União das Indústrias de Cana-de-Açúcar (Sugarcane Industry Union – UNICA) reported that production in the Center-South grew 5.6% in the second half of June compared to the same period last year, reaching 2.89 million tons.

“Moreover, the prospect of extensive sugar production in India is negative for sugar prices after the Indian Sugar Mills Association said last Wednesday that it projects India’s 2021/22 sugar production at 31 million tons, slightly above the 30.9 million tons expected in 2020/21,” Barchart points out.

Source: Valor