Market Report Feb 8th 2021

With many countries starting their vaccination programs, February has started as a month of hope for better days in which life could go back to normal. However, the number of victims of Covid-19 are still high all around, especially in Europe. In Brazil, the numbers are grim, but vaccination has already started. Politics in Brazil are favorable to reforms led by the Executive, as the newly elected presidents of both legislative houses are in good terms with Bolsonaro. In the US, the new Biden administration has reviewed most presidential acts enacted by the last president, and markets have reacted positively. We are still to see how the change in the White House will affect the government of President Jair Bolsonaro, as he was ideologically akin to Trump’s America.

Since the middle of November 2020, coffee closing prices have been fairly stable, fluctuating between 116,20c$/Lb and 127,75c$/Lb, a 9,94% variance. Since last week, closing prices ranged between 122,85 c$/Lb and 125,50 c$/Lb, a 2% variance. The first months of the year are generally months of less activity in Brazilian physical market, which could explain the horizontal trend seen in the future’s market.     

Out of 47 currencies studied against US Dollar, the Brazilian Real went 1,1% stronger in the past week, as has also the Turkish Lira (+1,48%) and the Russian Rublo (+1,55%). All of which have had considerable devaluations during the last year, respectively -24,4%, -17,70% and -15,76%. This might indicate some correlation in middle sized countries. The Real currently trades at 5,3740 R$/USD.

The physical market is on a slow pace in Brazil. Producers have had a good revenue in the last months, due to stable and moderately high future prices with weakening currency, and thus hold a strong position in their ask prices. In parallel, interest rates in Brazil are fairly uninteresting, with the Selic (base interest rate) at 1,9% per year. Holding coffee seems to promise better earnings.

Rains are expected in the next week in coffee regions. Accumulated precipitation in the Mogiana and South of Minas areas indicate on average 60mm, in Espírito Santo it could rain from 100mm to 200mm, in the Cerrado Mineiro between 40mm and 60mm, and 40mm in Zona da Mata.

We wish you all a great week!