Firmer Real Renews Coffee Buying Interest

The expectations for more jobs created in the USA did not materialize plus negative revisions from the previous month data made the market operators question the FED tapering.

However, the interest on US and German bonds went up in the week up to their highest level in more than two years, a sign that investors still believe that the QE may be indeed be diminished.

The main global stock exchanges closed higher, with a special note for the IBOVESPA and the European indexes.

Commodities went up in general as well, with coffee and sugar as the big winners.

Coffee in NY made new lows but quickly recovered to close better than the previous week, helped by the strengthening of the real, which returned to the 2.30 levels.

The week shortened by the Labor day holiday saw the confirmation of the buying interest from roasters, who have kept their buying orders scaled down. Even though it shows their belief for lower prices, at least we see that the current price levels are attractive.

In the physical market the movement was not that bad and buyers who have been patient to date have benefit somehow, since the differentials are dropping, albeit slightly, but this together with the flat price help the industry books.

In Brazil, the options plan was published and all is in line for the first auction to occur soon. The market, it seems, has already discounted this and the support seen reflects the eventual withdrawal of better coffees from the trade.

Meanwhile, in Central America and Colombia, producers get ready for their harvest, a fact that explains the diminishing of the spread between the differentials of buyers and sellers.

The Robusta, although with its differentials not getting weaker, seems to be poised to drop even further and take along the C with it. Besides the Vietnamese crop that should be really good, we have the question of the quality of the Brazilian Arabica, which many are saying it is worst for the current cycle, a fact that makes the lower coffees to put pressure on the quotes, ending up at times being cheaper than some varieties found at the LIFFE.

The recovering of the Brazilian real should help to keep the suggested interval between 110 and 130 safe, with greater support in new drops in the short term from the part of the commercials.