Market Reports

Brazil’s crop unlikely to reach record levels

Off-cycle coffee farms to affect Brazil’s production figures’,’none’,’ By MAJA WALLENGREN, Brazil Looking out from the ‘mirage’ view point at the Ipanema coffee estate in Brazil’s top coffee producing region of Southern Minas, rows of trees stretch as far as the eye can see.
Ipanema is one of the largest coffee estates in the world with 3,709 hectares of coffee. The farms estimated production this year won’t be enough to cover even half a day of the world’s coffee consumption – roughly 380,000 bags per day. Last year, the estate produced over 138,000 bags of green coffee, but this year they expect to produce just 85,000 bags. The estate is on the opposite cycle of the Brazilian coffee cycle.
Ipanema is an example of what most market analysts are failing to take into consideration in making their predictions for this year’s Brazil crop. More than two months before a single flower emerged for the 2012–13 crop year, funds and other sectors had been busy playing up the prospect for the new crop to potentially reach over 60 million 60-kilogram bags. The predictions were largely based on the ongoing replanting efforts undertaken over the last several years with higher density trees and better genetic material, providing the groundwork for a potential crop of between 62 and 65 million bags. Many producers, however, point out that for this to happen, weather would have to be perfect – something that rarely, if ever, happens in coffee. As the Brazil harvest moves closer to the start of the peak harvesting season in June, forecasts for the new crop have quickly dwindled with most industry estimates now pointing to production of between 52 and 54 million bags.  
The case of Ipanema helps explain why Brazil’s harvest forecasts in recent years have become increasingly volatile. Down-cycles appear bigger than normal and the up-cycles don’t produce the yields that many analysts at the beginning of the coffee year predict. “The difference between the up-cycle and down-cycle has become much smaller in the last few years,” says Luiz Suplicy Hafers, Director of the Coffee Department of the Brazilian Rural Society. “With all the replanting that has been going on, production in a lot of areas has evened out so that we’re not seeing this big change anymore from one year to the other.”
The higher density of trees has allowed Brazil to move from an average output of 25 million bags in 1990, to 35 million bags by 2000 and 45 million bags in 2010. Output is expected to continue to grow in the same gradual way over the next few years, although whether it can get to an average of above 50 to 55 million bags is in doubt. Hafers says that at some point yield and plant density “will be maxed out” from the current cultivated area. Many in Brazil also question just how the world supply-demand balance will be sustained, as the South American giant’s own consumption continues to grow rapidly. “Brazil needs to produce an average of 50 million bags, because we need at least 30 million bags in order to maintain our exports and we need 20 million bags for our own consumption,” says Joaquim Libanio Leite, Export Director for the Cooxupe cooperative in Minas Gerais state. “So we have a problem, because we can’t drink only Robusta coffee, so at least half of the local demand needs to be supplied by Arabica coffee.” Brazil’s Agriculture Ministry’s forecasting agency, Conab, pegged the 2011–12 harvest to reach 50.6 million bags, including 37.7 million bags of Arabica and 12.9 million bags of Robusta. Conab made the forecast following the latest review of the flowering and mid-term cherry development. This is up 16 per cent from the 43.5 million bags that Conab estimates Brazil produced in the last 2010–11 harvest. Some in the private trade, however, are saying that Brazil will produce between 55 and 56 million bags. Hope of the crop reaching 60 million bags is now unlikely. “Based on our last crop trip we have lowered our numbers for Southern Minas but Cerrado, Espirito Santo and Bahia is up and that compensates a bit for the loss in South Minas because of the drought,” says John Wolthers, Trader with Santos-based exporters Comexim. Comexim now estimates the new crop will yield 55.8 million bags, but has revised its number down from its initial projection of 58 million. This represents a 17 per cent rise on the year-ago figure and compares to the group’s estimate of total production reaching 47.8 million bags in the last season. Minas Gerais state accounts for 55 to 60 per cent of Brazil’s production, of which Southern Minas alone accounts for about a third. But, across Brazil, an increasing number of producers, farms and cooperatives are reporting figures at the opposite end of the national up-cycle. “In 2010 I harvested 700 bags and then last year I only had 240 bags. This year I am expecting to harvest about 600 bags. It’s a good crop but it’s not as good as in 2010,” says Sebastiao Porfirio, a producer in Juruaya. Coffee regions across Southern Minas including Guaxupe, Varginha, Mogiana, Alfenas and Juruaya, show a mixed picture of the crop. Some farms have trees bursting with abundant fruit, while farms in some regions show signs of complete abandonment. Most areas show decent but not impressive yields. From highs to lows, the average forecast sits at between 52 and 54 million bags. Many say that the new crop is not as good as the 2010–11 harvest season when Brazil picked 48.1 million bags, according to Conab, although private trade said the figure was closer to 52 million. “Our expectation is that the approaching crop will ease the tightness,” says Wolthers. “For sure, it will be very welcome.”

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