Trader Volcafe Sees Brazil’s Arabica Coffee Output Falling 33%

(Bloomberg) -- The world’s largest coffee producer Brazil will likely see output of arabica beans, the type favored by Starbucks Corp., fall 33% next year as dry weather persists just as farmers increased pruning of trees. That’s the forecast of Volcafe Ltd., one of the world’s largest coffee traders. Brazil will probably harvest 34.2 million bags of arabica coffee next year, down from 51 million this year, the Winterthur, Switzerland-based trader said in a report to clients seen by Bloomberg. The “tentative” forecast comes after a preliminary crop survey, which was restricted by the pandemic.

Brazil’s output was already expected to drop next year after this year’s record crop and as arabica trees enter the lower-yielding half of a biennial cycle. But dry weather and increased pruning after blossoming failed in arabica areas of southern Minas Gerais, Cerrado and Mogiana exacerbated the declines, with Volcafe cutting its forecast by 3.3 million bags from a June estimate. “Although typically coffee plants can withstand periods of low rainfall from May to August without causing any irreversible losses, prolonged dryness especially in Sul De Minas, parts of Mogiana and Cerrado over the last three months has caused below average soil moisture and a negative impact on blossoming,” the trader said. Flowers usually turn into cherries containing the beans.

The decline in Brazil’s output in the 2021-22 season will drive the arabica market into a record deficit of 11 million bags, Volcafe said, citing an estimate calculated on a crop-year basis, which starts when harvesting begins in each of the countries, spanning longer than a year. Most coffee traders usually look at balances for the 12 months starting in October. Coffee demand fell by more than 4 million bags in six months due to the pandemic, with global demand contracting 0.6% in the season that ended Sept. 30, Volcafe forecasts. While consumption is expected to rebound 1.2% in the current season, that will still be below the 5-year average of 2.6%, according to the report. Robusta coffee, the type used in instant coffee that’s also more prevalent in retail packages, has gained a boost as people drink more at home. “We project the share of robusta usage to remain elevated into next season,” Volcafe said.

Other highlights of the report:
* Robusta production in Vietnam, the top grower of the variety,
seen declining about 500,000 bags to 29.2 million.
** “With delayed harvesting the flow of the 2020-21 robusta crop is expected to start later than normal with the crop availability expected to reach a normal pace only by the latter half of December 2020.”
* Two consecutive hurricanes passing through Central American countries including Nicaragua, Honduras, Guatemala and El Salvador probably caused short-term damage to coffee production amounting to 300,000 to 500,000 bags, Volcafe said, citing preliminary estimates.