Forecasting Brazil’s Coffee Crop Gets Harder With Coming Floods
Forecasting Brazil’s Coffee Crop Gets Harder With Coming Floods
(Bloomberg) -- Estimating how much coffee Brazil will supply is proving a tough task for even the most experienced forecasters after extended drought, multiple frosts and now floods damage trees in the world’s largest producer.
Few crops are as closely watched as coffee in Brazil, which accounts for more than 45% of global output of arabica beans prized by high-end roasters for their milder taste. Traders hang on every estimate from analysts who trek around the country visiting farms to examine the health of their trees. But this year, many prognosticators who would normally get a first-hand look, smell, taste and feel of the beans are relying on second-hand numbers, or extrapolating weather and past trends.
This year’s crop is especially important, as it’s the larger in a two-year cycle for the arabica trees and follows last year’s dismal harvest that sent futures prices up to a decade high. A wide range of estimates and big changes just adds to price swings in an a market already known for its volatility.
While last year the problem was drought, downpours bring a new threat. Parts of Parana and Sao Paulo states will see flooding in the next few days, adding to stress on the trees, say analysts. That’s kept futures prices near a decade-high reached in December.
“Assessing the crop is getting harder than ever,” said Hernando de la Roche, senior vice president for StoneX Financial Inc. in Miami. “And for the farmers and those those going to inspect the fields, the coming floods won’t help.”
Analysts have been thwarted by the pandemic, which has made getting around the country more difficult and dangerous. StoneX and Rabobank are scheduling trips in the coming weeks to assess fields and crops again. The U.S. Department of Agriculture attache didn’t conduct the regular annual field trips, citing Covid and social distancing protocols. The agency said its widely followed figures were based on factors including historical data, observed weather patterns and crop figures from other sources.
Brazil may produce 61.4 million bags of arabica and the harsher robusta beans in the 2022-2023 season, according to the average of nine analyst estimates compiled by Bloomberg. While that’s up from last year’s 52.8 million, it’s down from 65.2 million bags in the last high-yielding cycle in 2020-21.
That midpoint encompasses a wide range from 53 million to 66 million 60-kilogram bags. For arabicas that’s even wider, from 31 million to 46 million, a gap bigger than annual production in Colombia, the second-largest arabica shipper.
Forecasts are often a moving target. In March, Volcafe, the coffee unit of ED&F Man, estimated the arabica crop for 2022-23 at 53 million bags, before the extreme weather hurt prospects. After more field visits yielded fresh evidence of damage, the company cut its view five times, to 37.5 million bags in a recent report.
Even for the country’s cheaper robusta crop, an expected record harvest isn’t set in stone, with plants also showing stress, said Judy Ganes, the president of J. Ganes Consulting, who traveled to the country several times. “People are too optimistic. Issues are greater than they think.”
Farms in the same regions, or even plots within the same farm, show differing flower development, which will lead to a varied number of beans in trees, clouding the production forecast, said Jorge Cuevas, chief coffee officer for Sustainable Harvest, an importer in Oregon. More clarity will emerge around April and May, once more coffee flows to the mills, he said.
“Forecasting Brazil´s 2022 crop has become an exercise in futility.”
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