Output concerns have driven prices up more than 10% this month
There’s also debate over outlook for next year’s harvest
By Marvin G. Perez and Fabiana Batista
First, there wasn’t enough rain. Then came the deluge. The swings were so wild in Brazil, the world’s biggest coffee supplier, that there’s now a big divide among analysts over what all that wacky weather means for the crop.
Forecasts for the 2021 arabica harvest vary greatly from as small as 25 million bags to as much as 36 million. With each bag weighing 60 kilograms (132 pounds), that’s a difference of about 660,000 metric tons -- enough to meet U.S. consumption for almost five months.
Concerns over Brazil’s coffee production have helped drive arabica futures up more than 10% this month, and prices are trading near the highest since December 2019. Smaller crops in Central America are compounding the outlook for diminished supply just as the world economy is set to reopen and reignite demand.
Jorge Esteve, a vice president for Empresa Interagricola SA, the Brazilian unit of Ecom Trading, is among those who are upbeat that recent precipitation will improve conditions for the crop. His firm is pegging output at 33 million to 34 million bags.
In 2021, farmers in arabica regions will collect the low-yielding cycle of the biennial harvest, which was hurt by drought.
Recent rains “have been enough to stop losses” from drought that affected early development for the 2021 crop, and the moisture may even boost productivity a little bit, Esteve said. He’s also not worried that the dry weather curbed potential for the 2022 harvest.
Next year, there’s going to be “a very good harvest,” he said. And for 2021, “we are very optimistic the rains will very helpful for yields,” he said by telephone from the port Santos.
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On the other side of the debate is Regis Ricco, a director at RR Consultoria Rural in Minas Gerais. Even with good rains recently, he estimates the 2021 prospects haven’t improved and he still sees the arabica crop tumbling by more than half to 25 million bags from 53 million last year. And just to get to that forecast, beneficial weather will be needed for the rest of the season, he said by telephone.
Analyst Judy Ganes, who is on a second tour of Brazil’s main growing regions for arabica and robusta coffees, is also more pessimistic on the crop outlook.
Even with the recent rains and more in the forecast, the severity of the drought was so bad that it may even reduce the 2022 crop, she said by telephone from Minas Gerais. Judging by the number of branch nodes that have developed, the lack of moisture has eroded 20% to 30% of growth potential in the worst hit areas for next year, she said.
“The crop that is on the trees is not uniform, and farmers have said that they won’t recover the cost of collecting the coffee,” Ganes said. “Low-lying coffee farms, mostly mechanized, have suffered the worst. Higher altitude farms show less damage.”
Some producers “feel the fruit size will be smaller than normal and quality will not be good,” she said. Production for next year “has been most definitely compromised,” Ganes said.
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