As the 2014 – 2015 Brazil coffee harvest progresses, widely ranging production estimates and uncertainty regarding carryover stocks is resulting in a high level of market volatility. The rolling 30-day volatility of the International Coffee Organisation (ICO) composite index indicator has been between 10 – 15 per cent since February. The average monthly volatility has exceeded 10 per cent for the fourth consecutive month, a first in nearly 20 years. “For years the market has been used to having numerous different estimates for Brazilian production, ranging 10 million bags or so,” said Andrea Thompson, Head of Research and Analysis for CoffeeNetwork (DBA FCStone, LLC) a subsidiary of INTL FCStone. “But this is of more pertinence to the market in the past couple of years, given the tighter supply/demand balance than five years ago.” The National Supply Agency of Brazil (CONAB) forecasts production to be 44.6 million bags, a reduction of 9.33 per cent or 4,585 bags, compared to 49.15 million in the previous harvest, and 8.7 per cent lower than the initial estimate in January. CONAB estimates Arabica production at 32.3 million bags, a decline of 15.8 per cent due to the severe drought in the first months of the year, as well as the frost that hit the state of Paraná in 2013. Robusta production is expected to increase by 13.5 per cent to 12.3 million bags, due to favorable climatic conditions in the state of Espirito Santo. The survey of carry-over stocks has not yet been reported. Other crop estimates ranged from 40 – 50 million bags, with projections for carryover stocks ranging from 6 ¬– 14 million bags. “CoffeeNetwork, on the basis of an 8 – 10 million bags loss from its preliminary 2014 – 15 production estimate, currently pins the Brazilian crop at 50 million bags,” said Thompson. “This will only be revised once there is more concrete evidence of the impact of adverse weather on yields across various growing regions. On the basis of a 50 million bags Brazilian crop in 2014 – 15, the world Arabica market would be in a fractional 0.3 million bags surplus. Therefore a Brazilian crop much lower than this current estimate, would swing the Arabica market into a production deficit.” With harvesting underway, farmers will begin to have a better idea of how much damage the severe weather inflicted on the 2014 ¬– 2015 crop. A compilation of factors that have never before occurred in Brazil’s coffee history has left the market highly volatile and unsure of the global supply/demand scenario.