Volatile swings in Brazil's currency and coffee futures prices dampened interest in producer selling of the commodity this week, as all eyes focused on flowering of the new crop, traders said on Thursday. Brazil's drought-stressed southeastern states, where much of the world's coffee and sugar is grown, saw heavier than expected spring-like rains push into the region this week, with more rains en route, forecasters said.
Outright prices in reais eased through the week after the Brazilian real weakened sharply against the dollar. Internal prices jumped to 450/470 reais a 60-kg on Monday, but dropped back to 420/440 reais by Thursday for benchmark hard-cup arabicas, according to Escritorio Carvalhaes brokers. Export discounts were quoted on Thursday at -5/-2 (buyer/seller) US cents/lb under ICE September futures for prompt delivery at the port of Santos on Thursday. The day before, traders quoted discounts at -3/+2 cents/lb, according to price discovery service Cepea.
Cepea said sellers were hesitant to close deals as the currency and commodities prices oscillated violently during the week. Coffee futures shot up more than 3 percent on Thursday ending nearly two weeks of decline. Coffee followed other commodities including sugar and oil that shot up as well. "All eyes are on the flowering now with the current crop all but finished harvesting," said Santos-based trader John Wolthers at Comexim trading house.
The widespread wet weather suspended the final weeks of harvesting of the 2015/2016 crop in Sao Paulo and Parana states. Rain has yet to push into the main coffee state of Minas Gerais except in isolated areas. Meteorologist Marco Dos Santos at forecaster Somar said more than 20 mm (0.8 inches) fell in many areas of the coffee belt. Santos said a new cold front was pushing into Brazil's south today and would bring more rain to the coffee belt.
"Take care against assuming rains have returned because of El Nino! September will still have irregular rain patterns," he said, adding that only in October would rains come with greater frequency. Coffee trees need regular rains every few weeks for flowers to set and create the buds that will be coffee fruit. Flowering has already started in the main robusta-producing states of Espirito Santo and Rondonia.
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