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Dryness remains a threat to world coffee output

OK, Brazil's arabica output is in for a strong rebound. But dryness lingers in robusta areas, and Colombia, Ethiopia, a top analyst says

 

postado em 16/02/2016 | Há 1 ano

Agrimoney

Dryness remains a threat to world coffee output

Dryness remains a threat to world coffee output

Dryness fears may have receded for Brazil's arabica coffee-growing areas, but the hangover from drought damage may hurt robusta prospects into 2017, and weather fears have grown in other producing countries too.

Judith Ganes-Chase, the longstanding soft commodities analyst, backed expectations of a strong revival in arabica bean output this year in Brazil, the top grower, from the drought-reduced levels of 2014 and 2015.

"Arabica production should snap back after a sensational flowering and lead to a strong harvest," Ms Ganes-Chase said, while acknowledging some concerns over residual dryness in some northern growing areas.

'Higher volumes'

The comments tally with ideas from other commentators, such as Brazilian institute IBGE, which last week pegged the arabica crop at 38.4m bags (2.30m tonnes), an increase of 12.8% year on year, led by a 21% jump in output in Minas Gerais, the top producing state.

Conab, the official Brazilian crop bureau, has pegged the harvest at 37.7m-39.9m bags, up from 32.0m bags last year, while research by Cepea signals that the figure could be even higher still.

In the Cerrado and southern regions of Minas Gerais, "agents are betting on volumes higher than that pointed by Conab", said Cepea, which is linked to Sao Paulo University.

In southern Minas Gerais, output could hit 14.7m bags, ahead of the maximum of 14.4m bags that Conab is forecasting.

'Robusta output compromised'

However, Ms Ganes Chase cautioned over the setback to Brazilian robusta coffee output from lingering drought in Espirito Santo, the main producing state for the variety.

"Now for the second year it is robusta output that is compromised," she said, cautioning that output of the bean from Brazil, the second-ranked robusta producer after Vietnam, may not even rise to the 11.4m-12.1m bag levels expected by Conab from last year's 11.2m bag harvest.

"While the market had been anticipating robusta production to recover only modestly as a result of the October dry spell, now there is a possibility that production will be less than last year's drought-reduced crop."

And, with coffee output dependent in part on the luxuriance of vegetation growth the previous year, there is "the possibility that even production in 2017-18 may not fully recover if necessary rains don't start to fall soon".

'Isn't going to last'

Weather issues have emerged in other countries too, including Colombia, where Ms Ganes-Chase, at J Ganes Consulting, said that a strong start to the 2015-16 crop year, which started in October, "isn't going to last".

"Colombia also had dry weather at the start of the season and the parched conditions have lingered," she said.

Ethiopia, Africa's top coffee-growing country, has "had a crippling drought" which, while mainly evident in areas which grow other crops has made for conditions that are "not ideal in the coffee regions either".

'Markets responding'

Ms Ganes-Chase added: "All these weather issues have created uncertainty and more variability about where production will be this season and next, the markets have certainly started to respond."

New York arabica coffee futures have staged some recovery from a two-year low of 111.05 cents a pound hit last month.

London robusta futures have revived from price of $1,318 a tonne three weeks ago which represented the weakest for a spot contract in nearly five years.

In Brazil's cash market, the differing fortunes of the arabica and robusta crops have been reflected in weakened premium, down to R$87.25 per bag, according to Cepea, a drop of 25% so far this year.

In percentage terms, the arabica premium, at 22.1%, is at its lowest in two years.

 

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