Brazil Rains Perk Up Coffee Prices

12/07/2012
 
Brazil Rains Perk Up Coffee Prices
THE WALL STREET JOURNAL (USA)
 
Unseasonable rainfall in Brazil is degrading the world’s biggest coffee grower’s crop this year and driving up prices for the globally traded commodity.

The most-actively traded Arabica contract on the ICE Futures U.S. exchange retraced from the day’s high to settle 0.1% higher at $1.8470 a pound, while the thinly traded front-month contract for July delivery settled 0.6% lower at $1.8270 a pound.

Arabica coffee for September delivery hit an intraday high on ICE Futures U.S. of $1.9220 a pound, a more than three-month high.

The above-normal precipitation knocked coffee cherries from trees and created a fertile environment for fungus, which hurts the quality of the beans.

“There’s no doubt that we have had damage to [the] quality [of the beans],” said Guilherme Braga, the head of Brazilian coffee-exporter association CeCafe. The rains have also delayed harvesting for a month, he added. Heavy rains prevented machinery and farmers from accessing coffee fields.

Heavy rains and winds knocked cherries from the trees, said Joaquim Ferreira Leite, export director of Cooxupe, Brazil’s largest coffee cooperative.

Brazil is the source of around one-third of the world’s coffee and government forecasters expect Brazil to produce a record crop of above 50 million 60-kilogram bags this season.

Industry members say this is still possible but production of high-quality beans will be limited.

“Twenty percent is already condemned, unfortunately, to be classified as low-quality coffees,” Mr. Ferreira Leite said in a telephone interview.

This could be bad news for importers of Brazil’s finer coffees, which many roasters have turned to in recent years amid weather problems that hurt production in traditional growers of gourmet coffees in Central American countries and in Colombia.

“It’s certainly an issue,” said Christian Wolthers, president of Wolthers America, of Fort Lauderdale, Fla., which sells green, or unroasted, coffee from Central America, Colombia and Brazil.

On a tour of coffee farms in Brazil, Mr. Wolthers said he noticed “furry, green-white mold” on waterlogged beans, which can produce a harsh, medicinal taste when brewed.

“This is a general situation in the arabica coffee belt,” he said. “We’re really in trouble with the quality.”

One redeeming factor for the crop is that the rains have cleared, and harvesting is in full swing, about a month later than normal.

“Producers are bringing in the biggest loads they can,” said Mr. Wolthers.