1 week ago
Brazilian Rains Threaten Premium Arabica Coffee Supplies and Quality
Brazil grows a lot of arabica coffee, the kind often used in premium coffee.
Very heavy rain knocked many ripe coffee cherries off the trees.
Some cherries sat on wet ground and could develop bad flavors.
Rain also fell on coffee beans that farmers had already put out to dry.
This made it harder to produce beans that meet high-quality standards.
As a result, the best Brazilian beans may become harder and more expensive to buy.
Coffee futures prices have already increased since June.
Large coffee companies may be able to use beans from other places or pass higher costs to customers.
However, Illycaffe’s chief executive said that higher prices are driven more by producers holding back sales than by quality problems.
Heavy June and July rains in Brazil delayed harvesting and damaged arabica coffee quality.
Simão de Lima estimates about 20% of cherries were washed from trees in Cerrado Mineiro, versus 5% to 7% typically.
Arabica futures have risen about 35% since June, while fine Brazilian coffees command premiums of up to 15 cents per pound.
The share of Brazilian output meeting ICE standards could fall from 30% to 35% normally to an estimated 10% to 15%.
The United States Department of Agriculture still projects a 10-million-bag global surplus, largely because of Brazil’s expected record harvest.
- Who
- Brazilian coffee growers, premium roasters and consumers; views were provided by Simão de Lima of Expocacer and Cristina Scocchia of Illycaffe.
- What
- Heavy rains damaged the quality and availability of premium Brazilian arabica coffee while delaying harvests.
- Where
- Brazil’s coffee-growing regions, particularly Cerrado Mineiro in southeastern Brazil.
- When
- The most disruptive rains occurred in June and July; the next coffee season starts in October.
- Why
- Rain knocked cherries from trees, left fruit on waterlogged soil and interrupted drying, potentially causing fermentation and undesirable flavors.
Quality damage is tightening premium supplies
Market behavior is driving higher premiums
Main cause of price increases
Quality damage is tightening premium supplies
Simão de Lima says the rains caused substantial quality problems and reduced the volume of high-quality coffee available.
Market behavior is driving higher premiums
Cristina Scocchia of Illycaffe says modestly higher premiums are driven more by market dynamics and well-capitalized farmers holding back sales than by specific quality issues.
Premium coffee availability
Quality damage is tightening premium supplies
Lima estimates that the share of output meeting exchange standards could drop sharply, meaning the global surplus may contain less premium arabica from his region.
Market behavior is driving higher premiums
The United States Department of Agriculture projects a 10-million-bag global surplus, largely because Brazil is expected to produce a record harvest.
Key facts
- Brazil’s arabica share
- Brazil produces about 45% of the world’s arabica coffee.
- Estimated fruit loss
- About 20% of cherries were washed off trees in Cerrado Mineiro, compared with 5% to 7% in a typical year, according to Simão de Lima.
- Rainfall levels
- Rainfall reached 250% to 500% of normal levels across parts of Brazil’s coffee belt, with some areas receiving as much as eight times the usual amount.
- Arabica price movement
- Arabica futures rose about 35% since June.
- Quality-standard impact
- The proportion of output meeting Intercontinental Exchange standards may fall from 30% to 35% to an estimated 10% to 15%.
- Brazilian coffee premiums
- Fine Brazilian coffees are selling for as much as 15 cents per pound above New York futures.
- Projected global balance
- The United States Department of Agriculture projects supply to exceed consumption by 10 million bags in the season beginning in October.
Quotes
Simão de Lima
Chief executive officer of the Expocacer coffee growers’ cooperative in Brazil’s Cerrado Mineiro region
“The vast majority of the beans end up developing quality problems, resulting in coffee with a higher degree of fermentation, which significantly affects the beverage. This has had a significant impact.”
livemint.com
“You have coffee that’s already drying on the ground, then more rain falls on that coffee and you have to start drying all over again.”
livemint.com
Cristina Scocchia
Chief executive officer of Illycaffe
“Any modest increase in premiums is driven more by market dynamics and the behavior of well-capitalized producers than by specific quality issues.”
livemint.com
Sources
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