February 06, 2014
Brazil coffee area ‘getting drier and drier’ – ICO
Brazil’s coffee areas are “just becoming drier and drier”, International Coffee Organization executive Mauricio Galindo said as the group unveiled a below-market forecast for world output, and futures soared a further 4%.
“It is true that Brazil is just becoming drier and drier,” Mr Galindo, ICO head of operations, told Agrimoney.com.
While Espirito Santo, the major area for growing robusta beans, had “extensive irrigation” to protect trees from the lack of moisture, this was “not so” in Minas Gerais, the main state for growing the arabica beans of which Brazil is the top producer.
Frost vs drought
This presented an irony for an industry which has moved largely north from states such as Parana to escape freezes which proved particularly severe in 1994 and in 1976, when a Brazilian cold snap sent arabica futures to the record high of 337.5 cents a pound which still stands.
“Farmers moved north to escape frost and now have drought,” Mr Galindo said.
Separately, data from consultancy Somar confirmed the dry start to February for Brazil’s coffee belt, with only the Cacoal region of Rondonia receiving any rain at all so far.
Somar forecast further dry weather for at least the next two weeks, as a high pressure ridge keeps cold fronts, and moisture chances, at bay.
Mr Galindo’s comments came as the ICO, in its first forecast for 2013-14, estimated a rise of only 659,000 bags to 145.78m bags in world output, a figure far smaller than that seen by many other commentators.
Indeed, it implies only a small production surplus, assuming that consumption continues its long-term growth of 2.4% a year on ICO measures.
Macquarie has forecast a 3.3m-bag rise to 150.7m bags in world output in 2013-14, with Rabobank estimating the increase at 1.9m bags to 150.6m bags, and Societe Generale pegging production 147.5m bags, albeit down on that the previous season.
The ICO figure – which incorporates last year’s Brazilian harvest, rather than the 2014 crop threatened by drought – includes a 7.2% rise to 60.34m bags in output of robusta coffee, supported by a 25% jump to a record 27.5m bags in output from Vietnam, the top producer of the beans.
However, production of arabica beans will turn out 3.8% down, at 85.44m bags, depressed in particular by the outbreak of the roya rust fungus in Mexico and Central America, whose combined coffee production is seen falling 13.5%.
Colombia vs Central America
This decline has been reflected in prices too, with values of the mild beans grown in Central America appreciating by 5.4% last month.
That saw them nearly overtake prices of Colombian milds, closing a discount which stood at 7.0% discount a year before, and reflecting the recovery in Colombian coffee output after a tree replanting programme, with varieties resistant to rust.
Separate data, from Colombia’s national coffee growers’ federation, showed domestic coffee production reaching 1.01m bags last month, up 15% year on year, and the best January figure since 2007.
‘Detrimental to development’
However, prices of Brazilian natural beans rose most last month, by 6.2%, the ICO said, highlighted the “speculation over the size of the upcoming Brazilian crop”.
“Particularly dry weather in January in several coffee‐growing regions in Brazil has been seen as detrimental to the development of the 2014-15 harvest, supporting coffee prices over the course of the month.”
A fall in Brazilian coffee output in 2014 would represent the first time since 1977 that the country has recorded two successive years of production declines, the ICO said.
Arabica coffee futures for March stood 4.8% higher at 142.85 cents a pound in late deals in New York, having touched 145.70 cents a pound earlier, the highest for a spot contract since May last year.
Robusta coffee for March stood up 2.6% at $1,856 a tonne.