1. General Overview of the Local Market

• Group 1

Volume of business continues surprisingly slow for this time of the season. Local prices stayed under some pressure of ICE-NY and firmer Real against US Dollar. Those low local prices keep the producers aside of the market as most of them consider current prices insufficient to cover producing costs. Exporters on the other hand cannot afford to pay current prices as they are far above those on their books. The approximate Swedish quality cost of replacement is US$12.00 c/lb under ICE-NY-U.

• Group 2

The flow of new crop arrivals is improving from both producing areas of Zona da Mata and Espirito Santo. However producers are not eager sellers trying to sell just the needs to continue to cover the harvesting costs. Prices stated between R$200.00 (inferior qualitieslow grades) and R$207.00. Quality of the new crop is up to Rio Minas standards so far.

• Conilons

Prices improved this week with Type 7/8 traded at BRL$180.00 (the low this crop was R$170.00 at the beginning of this month). Local roasters seen bidding as high as R$195.00 CIF Sao Paulo but they could not buy much. Most of the sellers are already asking R$200.00 CIF Sao Paulo.

2. Local Prices traded during the week

A. R$ per 60 kilos bag:
Type 6/7 spot Varginha, soft cup – between BRL$ 245.00 and BRL$255.00. Rio Minas Type 7 Rio standard cup spot Manhuaçu between BRL$202.00 and BRL$208.00 Low Grade Group 1, 600 defects – CIF Sao Paulo – between BRL$220.00 and BRL$230.00
Type 7 Conilons – basis delivery Colatina/Linhares – between BRL$179.00 and BRL$181.00
B. FOB Prices:
3/4 MTGB good cup (Swedish Quality) – US$ 23.00 c/lb under ICE-NY-Z. RM 17/18 current crop – US$102.00 FOB. Conilons 13 up – US$10.00 c/lb over LIFFE

3. Financial News

• Central Bank released June fiscal data showing a worse than expected result. Government spending is rising quickly but most of the increase is to finance current expenses rather than on anti cyclic policies. The net debt rose to 43 pct of the GDP.

• Real continued strengthened following the world dollar weakness. It firmed further this week hitting R$1.878. The range during the week stayed between R$1.878 and R$1.91. Today it closed at BR$1.8 (BRL$ 1.889 last Thursday).

4. Weather and Harvesting News

• It rained in all coffee areas and this system may continue causing showers over Southeast states from Parana till Bahia. It is likely that the dry weather returns next week but there are another wet front in the South which shall cause more showers by middle of August. Temperatures are cold but with no risks of freezing.

• The harvest goes on with almost 75 pct of the crop already picked. Quality of the new crop continues a concern especially in the large area of South of Minas as harvesting is being done under high humidity levels jeopardizing the natural drying process keeping the mechanical driers working over capacity or doing the dry process quicker than ideal.
5. Export Activities

• Group 1

Despite the narrower replacement differentials in the local market, some wide differentials were traded this week, mainly by trading houses. “Top German quality for USA “were traded at US$22.00 c/lb under NY-Z for September/October and November shipments while “Type Primeiro” traded at US$24.00 c/lb under NY for August till November string of shipments. “2/3 FC, SS” traded at US$21.00 c/lb under NY-U for prompt shipment. “2/3 FC, SS” also traded at US$18.00 c/lb under ICE-NY but for July up to December 2010
shipments.

• Group 2

Very little business done at current prices (US$101.00-US$103.00) as most of dealers believe that differentials (currently at US$34.00- US$35.00 c/lb under ICE-NY-Z) should wide as long as ICE-NY advances and more new crop become available.

• Conilons

Almost nothing traded except a couple of 16 up containers done at US$12.00 c/lb over LIFFE for August shipment.

6. General

• The pace of July shipments improved on the last 10 days with about 2.2 million bags declared for shipment, CECAFE shall release the closing figures on August 5th. The last 12 months ratio shall continue to be around 31 million bags.
Best Regards