Also Agrimoney article from yesterday below
Freeze costs Brazil 'more than 1m bags' in 2022 arabica coffee output
22 Jul 2021by Mike Verdin
This week’s frost in Brazil’s top coffee-growing state has cost more than 1m bags in lost production for next year, and will have a hangover on output further ahead too, said Rabobank, as prices jumped to their highest since 2014.
The “very surprising” frost has caused losses of “at least 1m bags” in Brazil’s 2022 arabica coffee production, said Carlos Mera, senior commodity analyst at Rabobank.
“It is more than that. The more than 1m bags is in visible damage. But there might be a lot of damage there we don’t know about,” Mr Mera told Agrimoney.
“Certainly, it is a big worry for the next crop and also future crops.”
‘Worst frost in two decades’
The comments came as investors attempted to gauge the knock-on effects of the frost which hit southern areas of Minas Gerais, Brazil’s top coffee-growing state, and parts of neighbouring Sao Paulo, the biggest sugar cane producer, on Tuesday.
According to Somar, temperatures fell as low as minus 4 degrees Celsius in Minas Gerais, although Inmet Brazil’s national meteorology institute, has reported a minimum of minus 1.2 Celsius.
“It is certainly the worst frost in two decades,” Mr Mera said,
In New York, futures in arabica coffee, the type grown in Minas Gerais, on Thursday touched 195.00 cents a pound for September delivery – up 10.8% on the day, and the highest for a spot contract since November 2014.
At that level, prices were up 25% from Monday’s close, and Commerzbank forecast further gains depending on the findings of crop assessments.
“If [damage] is indeed substantial, possibly causing many coffee trees to die completely, the price could well climb to or even above 200 cents per pound in the short term,” said Dr Michaela Helbing-Kuhl, Commerzbank agriculture analyst.
‘Another cold front’
Mr Mera stopped short of forecasting where the rally might end, saying that futures were amid “a weather market” - which makes predictions particularly difficult, dependent on changes in the outlook – and noting that there was “another cold weather front expected at the end of the month”.
He also flagged that the frost had come “at the moment when there are big concerns about the availability of Brazilian coffee because the current  harvest is very low even for a downcycle”.
Although the current crop – of which much is already harvested - remains unaffected by the frost, it has already been significantly reduced by drought.
Rabobank has pegged Brazil’s 2021 all-coffee harvest at 56.7m bags, a drop of 15.3m bags year on year, with this year’s arabica production estimated at 36m bags, down 17m bags year on year.
‘Kills young trees’
The extent of the damage to plantations reflected not just the dip into negative temperatures, but the persistence of cold too, Mr Mera said.
“Pockets of cold air normally roll down the slopes,” limiting damage to plantations.
“When cold weather accumulates in corridors, that’s when it’s a problem.”
Damage included largely defoliation, which “will take energy away from the next flowering process as trees replace leaves and branches”, Mr Mera said. Brazil’s 2022 beans will be produced from a blossoming period which starts in September.
Frost “also kills young trees. We have not seen temperatures low enough to see a significant number of adult trees killed.
“But young trees are susceptible, and they will need be replanted,” meaning the future harvest prospects have been undermined by this week’s freeze too, with trees taking five years or more to produce cherries.
Arabica vs robusta
In London, robusta coffee futures for September gained 6.0% to $1,885 a tonne earlier on Thursday, the highest for a nearest-but-one contract since November 2017.
With main robusta-growing areas unaffected by the frost, the lot has gained a more modest 8.8% this week.
Nonetheless, while robusta price gains “may be modest by comparison with arabica, all the same, robusta coffee has increased in price by a good one-third since the beginning of April”, Dr Helbing-Kuhl said, flagging support to values from logistical hiccups besides the arabica rally.
“Besides the news from Brazil - though it wasn’t the robusta growing areas that were hit by frost but important Arabica states such as Minas Gerais - the shortage of available loading capacities reported by Vietnam is playing its part in the upswing.”
Vietnam is the biggest robusta producer and exporter, with Brazil the biggest grower and exporter of arabica, and of coffee overall.
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