Projections of climate interference in coffee and doubts for sugarcane

hEDGEpoint Global Markets, a company specializing in hedging, risk management and market intelligence solutions for the global agricultural and energy commodities chain, presented analytical bulletins on coffee, sugar and oil.

Coffee

Rainfall rates have recovered in the last two months. In September, 78% of Arabica production received less than 60% of average rainfall, with this share falling to 5% in October and 14% in November. According to hEDGEpoint Global Markets, with La Niña becoming active again, the market is paying attention to possible impacts on the Brazilian climate. The most recent example is the 21/22 harvest, which suffered from drought.

Still, despite the forecast of a moderate intensity event in December and January, rainfall forecast models indicate that coffee growing areas will experience above-average rainfall in the coming months. However, some attention is needed over the next two weeks, especially in the south of Minas Gerais.

The assessment is by Natália Gandolphi, Market Intelligence analyst.

Sugar

According to hEDGEpoint Global Markets, it is estimated that the market has reached a short-term equilibrium between 18,7 c$/lb and 20 c$/lb. In this context, there are conflicting external market factors such as higher oil prices and high chances of La Niña against the contractionary perspectives of Central Banks and the uncertainties of the Ômicron variant.

Still, within the Brazilian market itself, there are questions that could shake up, or even intensify, spreads. The weather affected some large producers and this has already been accounted for, or does not represent a major risk to the current market situation. Therefore, it remains to be seen what the extent of the recovery of the Brazilian harvest will be and what the pace of Chinese imports will be in the coming months.

Also according to hEDGEpoint Global Markets, when evaluating Chinese numbers, it is likely that they will import above their historical average, albeit at a lower level than last year. In this way, the Indian parity is expected to support the first and second raw sugar contracts, since, being the main origin at the moment, it is necessary to pay for its product. From the second quarter onwards, the extent of the excess supply will depend both on the recovery of Brazilian sugarcane and on price parity with ethanol.

The analysis is by Lívea Coda, Market Intelligence analyst.

Oil

According to analysis by hEDGEpoint Global Markets, there are fundamentals on the short and medium term supply side that are likely to keep oil prices sustained. The Ômicron variant did not make any significant change in demand, while OPEC and the US continued to collectively produce less oil. This explains the rapid recovery seen after last week's sell-off.

Looking ahead, concerns about reduced oil investment have the potential to add a premium to early maturities as the amount of oil that will be made available in the future is uncertain. The lack of environmental policies to stimulate the production of renewable energy to meet demand also causes speculators to return to the inflated oil (fossil energy) market.

Heitor Paiva, Market Intelligence analyst, reached these conclusions.

Click here for other information