Brazil, New Crop Update

| April 13, 2017

Last week we traveled with our friends from Douqué Group to get a first-hand look at some Brazilian coffee plantations. During our 5-day trip we visited over 10 farms, and several cooperatives. We saw both large and small producers, with production capacity ranging from 1,000 to 40,000+ bags.

As expected, it was very clear to see that this is an off-crop for most Brazilian producers. Many of the trees we saw are underproducing, with a lot of pruning having been done as well. Judging by what we saw and heard from producers, numbers for the next Brazilian crop are expected to be around 48-49 million bags (nearly 19 million bags are consumed internally). This small harvest puts the market in a delicate situation, as a potential frost would result in a substantial increase in the market price.

Concerning the robusta shortage, we heard contradicting opinions from several producers. Some believed that there is still much robusta being held by producers and cooperatives, while others were certain there is an actual shortage. Most agreed that the import of robusta seems unlikely at the moment, but there is another important factor to take into account: as the robusta prices soared, many Brazilian roasters had to make alterations to their blend. This meant replacing the robustas in their domestic market blends with various qualities of low-grade Arabica, a change that was very well received by the consumers. Many roasters are accepting this change, and are expected to maintain these blends robusta-free in the long run. This will result in a substantial decrease of domestic demand for robusta, and eventually should help to bring the market price down.

It is also worth noting that some farms in the Mogiana region are experiencing an early harvest, having started selective picking in some plantations as early as March. This was due to an early flowering brought on by unexpected post-harvest rains last year.

Svenn Wolthers


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