Brazil's coffee output could fall near to 2015's drought-hit levels

18.01.2017

Brazil's coffee output this year could fall close to the drought-affected levels of 2015, officials said, flagging the dent to prospects from factors such as tree fatigue and fertilizer shortages.

Conab, the official Brazilian crop bureau, in its first forecast for domestic coffee output this year, pegged production at 43.7m-47.5m bags – a decline of at least 3.9m bags from last year's record crop.

At the lower end of the range, the result would only be some 400,000 bags above the harvest in 2015, when output hit its lowest in six years, amid a drought which fuelled a rally in New York arabica coffee futures above 200 cents a pound.

The Conab forecast is also below expectations from some other commentators, such as Brazilian trading house Terra Forte which last week, in its own initial estimate, pegged this year's crop at 48.1m bags.

However, Conab has a reputation for conservative production data.

Production hangover

The expectation of a production decline this year reflected an estimate of a drop in arabica output of up to 19.3%, with declines of 20% or more possible for parts of Minas Gerais, the top producing state for the coffee variety.

Conab forecasts for Brazil's overall 2017 coffee output and (year-on-year change)

Area in production: 1.896m hectares, (-2.8%)

Yield: 23.02-25.05 bags per hectare, (-4.9-12.6%)

Harvest: 43.650m-47.510m bags, (-7.5-15.0%)
Brazil's arabica crop, which is by far the world's biggest, typically shows a pattern of alternate higher and lower production years – 2017 looking poised to bring weaker volume, after the last year's record 43.4m-bag crop.

Conab noted that trees in southern Minas Gerais, for instance, were emerging from a year "in which the crops that were in production showed very high yields and a marked defoliation in post-harvest, with a tendency, therefore, for yield loss" this year.

Minas Gerais growers had undertaken severe pruning, or "skeletonisation", on many trees which had been particularly sapped by last year's heavy crop, or by winter frosts - a practice likely to benefit output next year, but at the expense of short-term output.

The bureau also highlighted a threat to yield prospects from fertilizer delivery delays, which merchants have said are down to shortages of some raw materials.

Robusta prospects

For robusta (or conilon) beans, in which Brazil ranks behind Vietnam among world producers, output will reach up to 9.6m bags this year, a recovery of up to 21% from 2016, when major growing areas remained mired in a prolonged drought.

Conab forecasts for Brazil's 2017 arabica output and (year-on-year change)

Area in production: 1.49m hectares, (-2.3%)

Yield: 23.48-25.40 bags per hectare, (-10.7-17.4%)

Harvest: 35.013m-37.882m bags, (-12.7-19.3%)

Still, that would represent a third successive year of sub-par output, with Brazilian production  

remaining above 10m bags from 2007-15, before dryness set in to areas including, notably, Espirito Santo, the top robusta-growing state.

In fact, there was potential for Espirito Santo output, pegged at 4.61m-5.30m bags, to come in below last year's 5.04m-bag result, and decline for a third successive year.

Conab noted that while Espirito Santo plantations received "more intense" rains this year, boosting flowering and early cherry development, prospects had been undermined by a hangover from "drought and a poor distribution of rainfall for three consecutive years".

This had, in encouraging lead fall, "jeopardised the development and vigour" of trees, besides dissuading growers from applying fertilizers, which require moisture to be effective.

Seedling shortage

The prolonged drought had also prompted growers to undertake "drastic" pruning, while uprooting many trees, leading to expectations of a drop of 9.5% to 235,415 hectares in Espirito Santo robusta coffee area this year.

Conab forecasts for Brazil's 2017 robusta/conilon output and (year-on-year change)

Area in production: 404,892 hectares, (-4.7%)

Yield: 21.33-23.78 bags per hectare, (+13.4-27%)

Harvest: 8.637m-9.628m bags, (+8.1-20%)

Attempts to renew plantations are being undermined by a shortage of seedlings to plant.

"Because of the drought, the nurseries have not been able to produce the normal amount of seedlings to meet demand," Conab said.

Demand in turn "has increased greatly" thanks to the recent return of rains.


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