Brazil has a bumper harvest of coffee beans, but suffering from coffee farmers in other producing areas?

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Brazil's coffee bean production hit a new high in the second half of 2018, becoming a major negative source of oversupply in the global coffee bean market, resulting in coffee bean futures prices still unable to shake off the 12-year low.

According to the Brazilian State Commodity Supply Agency (Conab), Brazil produced 62 million bags of coffee beans (60 kg each) in 2018, setting an all-time high. Conab expects production to slip to 53 million bags in 2019, but that also marks the high point of a "low yield year."

The so-called low-yield year represents the year after Brazil's coffee bean harvest. Since the country's coffee tree production has always been a two-year cycle, in the high-yield year, that is, the low-yield year. According to Comexim, Brazil's coffee bean production in 2019 is estimated to be about 58.2 million bags.

However, Brazil's bumper harvest in 2018 also means that coffee farmers around the world will continue to face low prices, and even farmers in many regions will not be able to make profits at all.

Brazil's influence on global coffee prices has been described as similar to Saudi Arabia's influence on oil prices. Brazil accounts for a third of global coffee bean production and a quarter of overseas export markets.

Coffee bean prices in New York have rebounded from recent lows, but remain below $1.10 a pound, below the $1.20-$1.50 level at which coffee farmers in Latin American countries can make a profit.

Global coffee prices plummeted to nearly 13-year lows last year, prompting coffee farmers in Guatemala to abandon coffee plantations and farmers in Colombia to plant coca bush, which produces cocaine. Kamu, director of the Africa Fine Coffee Association, also said some Kenyan farmers had switched from coffee beans to more profitable crops.

A weaker dollar may ease downward pressure on prices. Since coffee beans are traded in US dollars, a significant depreciation of the US dollar against the Brazilian lire would reduce Brazilian businessmen's willingness to export and help reduce coffee bean exports. For now, however, the Brazilian lire remains 45% below its 20-year average against the dollar.

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