Coffee producing regions across Brazil were hit with major damage following the most severe frost to hit coffee farms in 40 to 50 years. Maja Wallengren explains how multiple problems are causing an unprecedented deficit to the supply-demand balance and why the world is running out of coffee fast.
Where bright green and lush fertile fields normally cover the heartland of Brazil’s coffee producing region in Southern Minas, instead a carpet of wilted and dead coffee trees stretch as far as the eye can see. More than 200,000 hectares of land cultivated with coffee were so severely affected by the four rounds of frost that hit Brazil between the end of June and July that only dry and brown leaves are left on the stems, a golden, crisp brown shade normally associated with the turning colour of leaves at the end of autumn. There is no prosperity left for these trees to recover, and in over 27 years of origin travels across the world, there has never been a sadder coffee sight to this reporter.
The evidence of damage is overwhelming. From Serra Negra in the state of São Paulo across the world-famous coffee towns of Guaxupe, Nova Resende, Muzambinho, Cabo Verde and Alfenas in Southern Minas, through Franca and Pedregulho in the Alta Mogiana region, and all the way to Patrocinio, the coffee capital of the Cerrado Mineiro region, there is no denying just how bad the frost damage has been, and there is no ignoring the severity of the impact.
“In the 54 years I have been growing coffee since taking over the family farm from my father this is the most intense frost I have ever seen, we have always seen sporadic frosts but up until now the impact was always minor,” Guilherme Gerardo Rocha tells Global Coffee Report during a visit to his farm Fazenda Santa Helena in Nova Resende in August. Casting his eyes first to the left, then making a full 360-degree round, he points to row after row of completely burned coffee trees: “This is dead, look at this,” he says and cuts a branch of a tree. “This is all dead. Everything is gone,” says Rocha, who lost between 80 and 90 per cent of his entire cultivated area.
In a different part of Nova Resende, small-holder coffee grower Jorge Paulino Silva strikes a heroic pose as he takes in the rapid decline of the dead and wilting trees on his farm. But when his eyes fall on the entire plot of tiny new coffee trees that were planted out in the field earlier this year and are now all dead, his voice cracks ever so slightly. “My whole life has been dedicated to growing coffee. As long as I remember, I have lived off coffee, and we have always had frosts, but not like this, not like this,” says Silva, his voice breaking.
Deep into the hilly roads in Nova Resende the story of damage and devastation to the coffee fields has no end in sight. From completely burned producing areas to farms where trees are burned unevenly, either with the upper part completely wilted but part of the lower branches still showing signs of some life, and others where the frost literally cut each row of trees in half with one side still green and the other entirely wilted. Even if most of the farms in Southern Minas have seen the frost cause damage to an average between 20 and 30 per cent of the cultivated area, for the recovery of the farms, between 30 and 50 per cent of the total land will have to be either pruned or replanted to ensure an even harvest cycle.
“The level of damage from the frost combined with the drought is the most serious problem we have seen to Brazil’s coffee sector for years and our growers are struggling,” says Evair de Melo, Senator for the second largest growing state of Espírito Santo. He logged more than 15 hours flying over frost-hit areas across 180,000 hectares in 90 municipalities from southern São Paulo to the northern-most point of the Cerrado.
“For the frost damage alone, we can expect to see a loss of at least 10 to 12 million bags to the 2022 harvest but this is adding to the continuing damage from the drought,” says de Melo, who is working with a special coffee taskforce at the Agriculture Ministry dealing with the multiple weather problems.
Brazil’s 2021 harvest was already forecast to come in significantly smaller this year after excessive stress from producing a record crop last year, which Brazil’s official crop forecasting agency Conab said reached 63 million 60-kilogram bags. The 2021 crop was initially forecast by Conab to reach 48.8 million bags as yields were expected to drop more than the average difference between a cycle with a big crop, known as the “on-cycle” to the “off-cycle” where trees are recovering. But following the growing impact of the drought, which hit the flowering last year and at this point, over one year later, continues to damage flowering prospects for the next 2022 crop, Conab has lowered its forecast for the 2021 harvest to drop 25.7 per cent to 46.9 million bags, one of the smallest crops in 10 years from Brazil.
“As the situation has now deteriorated due to the lack of rains to the flowering for the next 2022 harvest, at this point we are calculating minimum damage between 10 to 12 million bags each for the next three consecutive years, from 2022 to 2025. We are talking about three crops in a row that will be very small for Brazil and total lost productivity of 30 to 36 million bags,” says de Melo.
In the heart of the Alfenas coffee region of Southern Minas, one farm stands out. Driving kilometre after kilometre within the Ipanema coffee estate, the magnitude of the damage sinks in at a different level. With cultivated land of as much as 3700 hectares and production reaching as high as 138,000 bags in some years, Ipanema is one of the world’s largest single coffee estates. Vast areas of the coffee farm are all burned black and brown, and with the potential to produce the entire world’s breakfast demand for one day, the obvious supply for that first morning cup is dwindling fast.
“At least 30 per cent of the total area cultivated with coffee was damaged, the severity of the frost here was bad and we will need to do a lot of replanting,” says an agronomist working at Ipanema, briefly stopping to speak with GCR before heading to a different part of the farm to survey damage.
And from Ipanema in Southern Minas to the Cerrado region in the north-western corner of Minas Gerais state – which accounts for 65 per cent of the total Brazilian Arabica harvest in an average cycle – Jose Carlos Grossi of the Alto Cafezal coffee farm has already decided to switch at least 30 per cent of the total land, which was the most severely damaged from coffee to grains instead.
“Over 40 per cent of the coffee area was damaged, and while I can recover a small area of this with pruning, the majority of that is too damaged and it’s too expensive to take the financial risk to replant with coffee, so I am already uprooting trees to be ready to grow soya and corn crops starting in November,” Grossi says.
The impact of trouble in Brazil for the market cannot be underestimated. In any average crop cycle Brazil grows between 35 and 40 per cent of the coffee consumed in the world with demand forecast to reach 168 to 170 million bags in 2022, according to figures from the International Coffee Organization (ICO) and the United States Department of Agriculture. Ending stocks for the 2021-22 cycle held in the key importing markets of the US, Japan, and the European Union are seen at 22 million bags while inventories in producing countries are believed to be insignificant. This compares to total world consumption of 79 million bags in the 1991-92 cycle, according to the ICO, and analysts agree global demand shows no signs of slowing down.
It was this delicate balance that sent Arabica prices in the New York market rising to seven-year highs over US$2.20 per pound in late July, following confirmation of frost damage in Brazil. Even if total damage from frost and drought reaches no more than 10 to 15 per cent, this would still be a volume equivalent to the entire coffee harvest from Colombia in an average cycle. But losses could rise further as the new flowering for the 2022 crop already see yield potential down by 30 to 40 per cent from both a rain shortage as well as rains running so late that many regions have lost the first round of flowering.
“The problem is very serious because of the large deficit in rainfall between March and September which comes on top of the water deficit in soils and trees in the areas affected by the drought since last year,” says Marco Antonio Jacobs, a Brazilian economist who has worked with coffee trade analysis for more than 40 years. Agronomists and climate experts agree, saying the water deficit is running at less than 10 to 20 per cent of what is considered necessary to ensure a healthy flowering.
“What we are dealing with now is [whether there] will there be enough rain to halt further yield declines beyond what is already pretty much a given,” says meteorologist Mike Palmerino.
As fresh supply from Brazil continues to come down, the pace of exports will start to slow, with analysts and Conab agreeing Brazilian exports could be reduced by as much as 50 per cent during the next 12 months to 23.9 million bags from 46.5 million bags in the 2020-21 year. This will ultimately lead to roasters and others in the trade starting buy into the remaining stocks held in port warehouses in importing countries. Adding to this are smaller than expected crops reported from other leading coffee producing nations Vietnam, Colombia, Honduras, and India.
“The market will run short of coffee. Where will the world find the 25.5 million bags to sustain the growing demand?” asks Marcelo Fraga Moreira, analyst and broker with Archer Consulting in São Paulo, in an internal research note shared with GCR. The only thing clear, is that Brazil will not come to the rescue for meeting global demand until the Brazilian production cycle starts recovering in 2025.
Silvia Fonte, who had 2.2 hectares of coffee in the hilly São Paulo region of Serra Negra until the frost turned the farm into a 100 per cent loss, is determined to get production back, but admits it will not be easy. “Here we were, very unfortunate to see damage from three of the four rounds of frost with temperatures down to between -2°C and -4°C. It was extremely severe,” she says, voicing the sentiment most producers in Brazil are going through. “Now we will have to study the different options available for financing to get back in business, but we will have to start from scratch.”
The outlook is bleak, and consumers as well as roasters need to prepare for higher prices.
This article was first published in the November/December 2021 edition of Global Coffee Report. Read more HERE.