Harvesting in progress in Brazil, Arabica prices drop in July, Cepea

SAO PAULO, Brazil – The domestic prices for Arabica coffee in Brazil faded in July, says Cepea in its latest report issued on August 3rd. On July 29, the CEPEA/ESALQ Index for arabica coffee type 6, delivered to São Paulo city, closed at BRL 1,300.89 (USD 251.23)/bag, 60.31 Reais/bag lower (-4.4%) than that on June 30. Pressure came from both international devaluations and the progress of the 2022/23 harvest in Brazil.

Abroad, the future contracts for arabica coffee prices fluctuated widely last month

But, on average, values faded, majorly because of concerns about the low economic growth in China and the fear of a world recession. Besides, the Central Bank of the United States (FED) continues to expect higher interest rates in the country.

In Brazil, the harvesting of the 2022/23 crop of arabica is in progress. Cepea surveys show that nearly 60% of the total expected has been harvested.

With this percentage already harvested, farmers believe there will be a significant crop failure in the current season, compared to that in other positive biennial cycles. However, the current crop has been marked by beans of high-quality beverage because of the dry weather during the harvesting.

As for sales, the current high volatility of quotations and lower production are making farmers more cautious when selling the product in both the spot and the future markets. Thus, domestic liquidity in July was lower than that in the same period of previous years.

Robusta

Opposite to the scenario in the Arabica market, the quotations for robusta rose slightly in July. The CEPEA/ESALQ Index for the robusta type 6, screen 13, Espírito Santo, closed at BRL 715.38 (USD 138.04)/bag on July 29, 0.9% up in the month.

The domestic valuation of robusta coffee was a reflex of higher demand from Brazilian coffee roasters, due to the increase in the share of robusta used in blends, since arabica values have been too high. Robusta price rises led a higher number of farmers to the market in July, favoring deals.

The demand for robusta has increased all around the world, which is expected to underpin prices. According to international news agencies, a large-sized food company has opened a new plant in Mexico, to which Brazil is the major supplier of robusta due to both location and the competitiveness of the national coffee.

As for the harvesting of the 2022/23 crop of robusta, it ended in Brazil in July. Cepea collaborators from Espírito Santo reported that high production estimates have been confirmed, although the lack of labor in the last months slightly reduced productivity. On the other hand, in Rondônia, despite the high quality of the beans, the volume harvested was lower than the expected because of the drought in 2021.

Farmers from ES and RO have been watching out for the weather, expecting rains to favor blooming. According to Climatempo (weather forecast agency), the weather is expected to continue dry, and temperatures, high in the coming days in Rondônia. In Espírito Santo, temperatures will be mild, moisture will be higher, but rainfall is not expected to be high.