Harshest Brazil Weather in Decades to Slash Arabica-Coffee Crop
2021-02-23 12:00:12.751 GMT


By Isis Almeida and Manisha Jha
(Bloomberg) -- The toughest weather conditions since the
1980s should see Brazil’s output of smooth-tasting arabica
coffee slump by more than 40% this year, according to consultant
Bison Luxley.
Production of the beans favored by Starbucks Corp. will
probably total 28.7 million to 30.5 million bags after drought
and heat hit trees during the flowering season, said Neil
Rosser, an analyst at the London-based company. That’s down from
52.5 million bags last year, he said.
The forecast -- among the lowest so far -- follows a
13,000-kilometer (8,080-mile) tour of about 3,100 Brazilian
sites by industry veteran Gilmar da Silva Lobo for Bison Luxley.
Traders Volcafe Ltd. and Ecom Agroindustrial Corp. have said
they expect the crop to fall by about a third. That’s helped
push arabica futures to near the highest since December 2019 in
New York.
“This is really quite a rare occurrence,” said Rosser, who
has followed the coffee market for three decades and previously
worked for Neumann Kaffee Gruppe and Olam International Ltd.
“It’s ‘84 you have to go back to get anything this similar, and
I think people are underestimating to this day what happened in
Brazil, how serious the dry weather was.”
Brazil’s arabica crop last fell below 30 million bags in
the 2007-08 season, Rosser said. Trees are also tired after last
year’s record harvest, while heavy pruning by farmers is
limiting output too.
Futures have climbed about 30% since the start of November,
and jumped on Monday on worries that excessive rains will
further hurt Brazil’s crop potential. Prices are still much
lower than in previous cycles of smaller crops in the country,
partly as global lockdowns threaten out-of-home demand.
There also may be less speculative interest than in the
past, limiting the ability for price rallies. Some big traders
like hedge fund Armajaro are no longer around, and a crunch in
commodity trade finance has constrained the number of players
and the size of the positions they are can take in the market.
“The risk takers aren’t there and peoples’ time horizon has
narrowed,” Rosser said. “It’s hard to think about what’s going
to happen in the next six months when you are trying to make it
through the next six days.”
Brazil is still set for a good harvest of robusta beans,
favored to make instant coffee. Bison Luxley expects that crop
to total 22.3 million to 23.7 million bags, Rosser said.
“We are quite optimistic about the conillons side,” he
said, referring to Brazilian robusta. “That has not been
affected by the weather so much.”