Drought in Brazil hits key commodities

Brazilian sugar-cane farmers are struggling to cope with the effects of low rainfall. Photo / Bloomberg

Drought in Brazil, the world's biggest producer of coffee, sugar and oranges, is harming crops and drying the Amazon River to its lowest level in 47 years.

The Amazon's 18-metre level on September 20 was the least since 1963, disrupting transportation of food, fuel and medicines in northern Brazil, the National Water Agency said in an emailed statement.

Growers in Brazil's southeast expect the drought will pare output of the nation's key commodities.

Sugar rose to the highest price in seven months in New York yesterday and has jumped 29 per cent this month because of concern the South American drought threatens global supplies. Orange juice gained 15 per cent this month and coffee soared 33 per cent this year. The dry weather will persist at least until mid-October, said Willians Bini, a meteorologist at Sao Paulo-based weather forecaster Somar Meteorologia.

"Farmers will have to be really patient because rains are delayed for at least a month," Bini said.

La Nina, as the cyclical cooling of equatorial Pacific Ocean waters is known, triggers changes in weather across the globe, including dryness in parts of Brazil and hurricanes in the Atlantic Ocean.

Coffee crops in the southeastern state of Minas Gerais may be hurt by the driest weather in four years as spring starts in the Southern Hemisphere and trees begin flowering for next year's harvest, Joaquim Goulart de Andrade, a manager at the Cooxupe co-operative, said.

The group produces 13 per cent of all Brazilian arabica coffee.

Minas Gerais accounts for about half of the country's output.

Rainfall in Cooxupe's region averaged 85.2 millimetres in the five months through August, the least since 2006 and less than half the 49-year average of 212.3 millimetres for the period, according to data on the co-operative's website.

"If it doesn't rain, there is just one word to describe it: Disaster," Aldir Alves Teixeira, who manages coffee purchases in Brazil at Illycaffe, said from Sao Paulo.

Trieste-based Illycaffe is Italy's biggest roaster after Lavazza and buys half of all its coffee from about 1200 growers in Brazil.

Sugar-cane crops in the Brazilian Centre South, the world's largest producing region, are also being hurt by a drought that will pare yields for this harvest and the next, Jacyr Costa Filho of sugar maker Acucar Guarani said.

"Yields have already been seriously damaged," said Costa, chief executive officer of the sugar maker controlled by Tereos, Europe's third-largest sugar producer.

"The losses are already there."

Sugar-cane output may fall for the first time in 11 years next year, said Gustavo Correa, an analyst at research firm FG/Agro in Ribeirao Preto, a sugar and ethanol industry hub in northern Sao Paulo state.

"The weather is also harming seedlings, reducing output potential for coming crops," Correa said.

The Centre South will harvest between 530 million and 560 million tonnes of sugar cane next season, down from about 570 million tonnes this year, he said.

The last time production fell was in 2000, according to data on sugar industry association Unica's website.

At Brazil's main sugar ports, showers from cold fronts that have cleared up at the coast before reaching rural areas are delaying ship loading because humidity harms the product.

Orange groves in Brazil's citrus belt, the world's biggest producing region, will reduce output more than previously expected this year to the lowest since 2001 because of below-average rain, according to Sucocitrico Cutrale, which makes about 30 per cent of global orange-juice supplies.

The region's orange crop may drop to 271.7 million boxes, less than a May 7 estimate of 286 million, Cutrale corporate affairs director Carlos Viacava said. Production will decline from 305 million boxes last year. A box of oranges weighs 40.8kg.

"Dryness is so extreme in the fields that sometimes it is even hard to breathe," Viacava said.

Cutrale, the world's second-biggest orange-juice producer, owns groves and processing plants in Sao Paulo and Florida and port terminals in Brazil, Europe and Asia.

The company, based in Araraquara, Brazil, supplies orange juice to McDonald's and Coca-Cola's Minute Maid.

A joint venture between Brazil's Citrovita and Citrosuco is the world's largest producer. Soybean farmers in Brazil, the world's biggest producer after the US, are delaying planting as they wait for rains in centre-western Brazil, Somar's Bini said.

Planting in Mato Grosso state, which produces about 30 per cent of the country's soybeans, usually starts in mid-September.

Soybean futures have risen 11 per cent in Chicago this month on concern dryness in Brazil and Argentina may delay planting and reduce sowing of the oilseed.

- Bloomberg