Brazil Coffee Crop Disappoints After Beans Affected by Drought

Brazil, the world’s top coffee producer, is on track to harvest a weaker-than-expected crop in a frustrating development for already tight global markets.

Bloomberg
First Published28 Jun 2024, 02:39 AM IST
Brazil Coffee Crop Disappoints After Beans Affected by Drought
Brazil Coffee Crop Disappoints After Beans Affected by Drought

(Bloomberg) -- Brazil, the world’s top coffee producer, is on track to harvest a weaker-than-expected crop in a frustrating development for already tight global markets.

Farmers are picking up smaller-than-usual beans after trees went through a period of heat and drought that harmed development. While the extent of the impact is uncertain, the concern is already spurring some downward revisions for production estimates of arabica, the premium variety used by specialty coffee chains. 

“There is certainly a concern about production shortfall,” said Simão Pedro Lima, an executive at cooperative Expocacer, who added that the average size of beans is probably going to be lower than in previous years in the key growing region of Cerrado Mineiro. 

Arabica futures are on pace for a fourth straight monthly gain and have climbed about 20% this year on supply concerns. Prices for the robusta variety are up too, jumping more than 40% in 2024 as production in key grower Vietnam buckles under drought. J.M. Smucker Co., whose brands include Folgers, Café Bustelo and Dunkin’, said this month the company is set to hike prices as it faces higher coffee costs.

This month, Marex Group Plc. cut its outlook for the Brazilian crop to 44 million bags of arabica beans in the current 2024-25 season. That compares with its March estimate of 46.6 million.

The weaker harvest is confirming farmer fears. High temperatures that set in during late 2023 were harmful to the initial development of beans, said Regis Ricco, a consultant who serves several coffee producers in the largest growing areas of Brazil. He believes output will be 10% to 15% lower than previously expected as growers will need to use more beans to fill a bag of coffee. Each bag weights 60 kilograms (132.3 pounds).

With the harvest in Brazil still ongoing, it’s possible that farmers will notice some improvement in the months to come. Still, there are doubts on whether any future relief would be enough to offset the losses already reported. 

More downward revisions to market estimates could come soon, said Albert Scalla, senior vice president of trading at StoneX.

“The bean count is coming down — the yields are easing off,” he said. “Most likely, the next volatility that you may see in the market is a lot of the estimates published, some of them pretty aggressive on the high side, may have to come down in order to reflect this lowering of the yields.”

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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First Published:28 Jun 2024, 02:39 AM IST
HomeNewsBrazil Coffee Crop Disappoints After Beans Affected by Drought

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