ARABACIA PRICES HIT 6.5 YEAR HIGH BEFORE FALLING BACK

Gloomy forecasts for Brazils harvest pushed prices up last week, briefly hitting a 6 1/2 year before softening after news that the frost that causes severe damage last week, would ease this week.

Robusta prices hit a three and a half year high, while Arabica futures were at their highest for over 6 years, at one point on Friday, as concerns over future supply from Brazil started to bite.

It was only back on July 5th that the International Coffee Organization (ICO) raised its 2020 / 2021 coffee surplus estimate by +12%, to 2.26 million bags, from its previous estimate of 2.02 million bags.

Then CeCafe last week, noted that Brazil June exports were slightly higher at +0.4% Year on Year, to 2.73 million bags.

However, the impact of recent weather conditions in Brazil is hard to overestimate. the widespread frost had a severe effect, not just on the current harvest, but damage to the trees will impact the 2022 crops, which is particularly significant because Arabica is a biennial crop, and 2022 is an upswing year when farmers expect to see a greater yield.

In addition to the frost, however, some parts of Brazil including the important coffee growing area of Minas Gerais are experiencing the worst drought they’ve had in almost 100 years

The lack of precipitation is so dire that hydroelectric dams are having to operate at a fraction of their capacity leading to fears of power cuts. As one coffee farmer put it:

I’ve been growing coffee for more than 50 years, and I’ve never seen as bad a drought as the one last year and this year. -Christina Valle, a third-generation coffee grower in Minas Gerais

Brazilian president Jair Bolsonaro, meanwhile, shrugs off claims that this has anything to do with climate change and says he is just unlucky to have these difficulties to deal with.

Leave a Reply

en_GBEnglish