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Brazilian coffee grower Joaquim Jose de Oliveira won't be bringing his full harvest to market this year. Drought that has hit next season's crop is forcing him to husband this season's.
"I'm only selling enough to keep going," says Oliveira, 50, who wears a straw hat, mud-smeared clothes and white, rubber boots as he prunes one of his trees near the town of Guaxupe.
"Otherwise, next year I'll have almost nothing to sell."
October rains came too late for trees in Brazil's prime coffee-growing region to recover from the driest winter in 20 years. Few of the plants have flowered properly, so next season's harvest will be meagre.
Forecasters say output in the world's largest coffee-producing nation will fall to a four-year low. That has pushed up futures prices by 10 per cent in the past month to US$1.2265 a pound on the New York Board of Trade. Prices may rise to as much as US$1.35 a pound as farmers, like Oliveira, hold back supplies, says coffee trader John Wolthers.
"Producers are disciplined these days," says Wolthers, who works at Santos-based coffee exporter Comexim, which buys high-quality Arabica beans. "They've learned to manage the pace of sales pretty well."
Wolthers, 51, buys most of his coffee from the southeastern state of Minas Gerais, where communities such as Guaxupe produce some of Brazil's finest beans.
Oliveira says that because of the drought, only 1200 of the 23,000 trees on a plantation he farms with his three brothers flowered properly.
The Institute for Agricultural Economics, in Sao Paulo, forecasts Brazil's next April-to-October harvest may shrink to a four-year low of 30 million bags, each containing 60kg, from 41.6 million bags this year.
Brazil's coffee production normally has a two-year cycle that consists of a larger crop, such as the one just harvested, followed by one of about 20 per cent less. A decline to 30 million bags would be a 28 per cent drop.
Mild-tasting Arabica beans account for about 70 per cent of Brazil's output. The rest comes from Robusta beans, which are more bitter and are used to blend with Arabicas or to produce instant coffee.
About half the Arabica trees in Brazil did not flower properly because of the dry spell, says Margarete Boteon, head of coffee research at the University of Sao Paulo.
The extent of flowering determines the size of the harvest.
After pollination, the trees develop bright-red cherries containing two beans.
Guaxupe, which has the world's biggest coffee co-operative, is in the hills that border the states of Sao Paulo and Minas Gerais, which produce 80 per cent of Brazil's Arabica beans.
The 10,000 members of the Guaxupe Regional Coffee Co-operative, known as Cooxupe, produced about 4.2 million bags this year, equivalent to 13 per cent of Brazil's Arabica output.
Next year, Cooxupe's production will fall 40 per cent to about 2.5 million bags, says Joaquim de Andrade, the co-operative's chief agronomist.
From May to September, Guaxupe received only 80.6mm of rain, compared with 250mm a year earlier. The rainfall was the lowest since 1985.
Because of the drop in production, Cooxupe is advising farmers to sell the minimum from this year's harvest, says Mario Ferraz de Araujo, another co-operative agronomist.
"We try to show them how to manage the sales to avoid financial difficulties later," says Araujo.
More problems may be looming -Jose Francisco Pereira, general director of Fazenda Monte Alegre, Brazil's third-largest coffee farm, believes global warming may lead to recurrent droughts, reducing world supplies of Arabica.
That would lead roasters to increase the amount of Robusta coffee, which is more resistant to heat and drought, in their blends.
The biggest producer of Robusta coffee is Vietnam, followed by Brazil and Indonesia.
- BLOOMBERG
