Right now the differential to New York is higher because the C-market dropped quite a bit, but the physical price in Brazil hasn’t fallen at the same pace. Producers are still selling coffee around $350 per 60kg bag, so exporters need to sell at a positive differential over the NY price to cover those costs. In simple terms, the physical market in Brazil is currently trading above the equivalent value of the New York futures.

Looking ahead, the expectation for the next Brazilian crop is around 70 million bags. If that happens, the larger supply could push domestic prices closer to $280–$300 per bag, and in that case differentials could turn negative, since exporters would be able to offer coffee below the New York market.

Analysis done by Junior Cardoso, Head of Coffee