Brazilian coffee production falls short of expectations! Robusta prices will rise

In recent times, Brazil's coffee producing areas are still affected by the El Niño phenomenon and have been in relatively dry weather, which is conducive to local coffee harvesting. However, according to Safras&Mercado, harvesting is currently accelerating. As of June 25, Brazil has harvested 50% of its coffee production, higher than the average harvest progress of 45% in the same period in the past five years.

Among them, Arabica coffee harvest progress is 35%, and Robusta coffee harvest progress is 62%, both higher than the harvest progress in the same period in the past five years. Although the harvest progress is rapid, judging from the current actual harvest, the performance of the production area is not as good as expected, mainly because the actual output is lower than previous market expectations, and secondly, the problem of small coffee beans.

Brazilian weather forecasting agency Somar Meteorologia reported that some Brazilian states had rainfall, but the rainfall was limited. However, the weather in some states is dry, especially Minas Gerais, which has had no rain for three consecutive weeks and is expected to remain dry for some time to come.

But at the same time, there is also concern that drier weather conditions than before will have an adverse impact on Brazil's coffee crops. The hot and dry environment will be conducive to the growth and spread of some pests, affecting yield and quality, thus accelerating the harvest progress. However, a dry climate is conducive to the processing of coffee cherries, which helps improve the quality of coffee beans through good drying, processing and storage procedures.

In terms of Robusta coffee, judging from the harvest situation, the actual output is significantly lower than previous market expectations. The total output is expected to decrease by about 8%-14%. After all, some Robusta coffee producing areas have reported a 20% reduction in production.

At present, Robusta's futures prices are basically maintained at around US$4000/ton, due to the impact of Robusta's production reduction due to the dry weather in Vietnam. If Brazil's Robusta also reduces production, Robusta's futures prices will continue to rise in the future. The Robusta Coffee Spot Price Index closed at 1,195.94 reais/bag (60 kilograms per bag), an increase of 4.07% from the end of May.

However, after experiencing high temperatures, Brazil is set to experience a strong cold snap, and temperatures in São Paulo and Rio de Janeiro may set cold records. According to data from the Meteorological Administration, parts of the states of Greater South, Santa Catarina and Parana will be the most severely affected, with temperatures in some areas likely as low as-8 C, while temperatures in other areas may be below normal, and such powerful cold air masses were common before passing through the central part of the country. Moreover, it may have a certain impact on some coffee producing areas.

Therefore, preliminary evaluations by many experts earlier estimated that Brazil's total output was about 68.5 million bags. However, as the harvest progresses, due to the small shape of the coffee beans, uneven maturity, and strong cold currents, Brazil's total coffee production is expected to be reduced to 67 million bags.