Brazilian Coffee Growers
Ref .: loss of coffee production for the 2021 harvest
Dear Coffee Growers,
The main arabica coffee producing regions are experiencing an inhospitable climate, with a prolonged drought, rains have decreased considerably from March 2020 until the present moment.
If the water deficit were not enough, average temperatures are very high and above historical averages, and so there was strong evapotranspiration, and today the soils are extremely dry, without water reserves, bringing severe consequences for the Brazilian Arabica coffee park, see the year 1985.
A severe drought is also reported in Rondônia, affecting conilon production in that state.
We are seeing an enormous amount of drastic pruning in arabica coffee fields, and the combination of these factors listed above, leads us to believe that in 2021 we will have a small harvest in quantity, we risk saying that the harvest of arabica coffee will be smaller by at least 15 million bags, in a year that there would already be a smaller crop due to bienniality.
In order of magnitude, this loss represents more than the total production of Colombia, which is the third largest producer of coffee in the world.
Therefore, we warn that Brazilian coffee growers who have already made future sales review their perspectives and expectations of production.
If they are in an unfavorable expectation with their future sales, we suggest that they look for their buyers, including in the "barter" modality and propose a repurchase of their short position, or part of it, thus adjusting their new production expectation.
This is perfectly legal and usual, being widely practiced in the international commodities market, the term used is called “washout”.
We believe that because the international market has not yet reacted in prices, this repurchase may take place without financial loss, and, in some cases, even at a profit, each case is different.
We thank you for your attention, and we are at your disposal for further clarification,
Armando Mattiello - President of the Association of Coffee Growers of Brazil.
Marco Antonio Jacob - Director of the Association of Coffee Growers of Brazil.
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