Brazil Robusta Coffee Climbs Amid ‘Disaster’ Crop Conditions

Brazilian prices for robusta coffee climbed
to a record, in stark contrast to the decline in international
prices in recent months, after drought conditions curbed
domestic production this year and fueled concern that output
will shrink again in 2016.
The price in Espirito Santo state, Brazil’s largest robusta
producer, rose 0.9 percent to 378.33 reais ($102) per 60-
kilogram (132-pound) bag on Thursday, according to Cepea, the
research arm of the University of Sao Paulo. That’s the highest
for the data, which goes back to 2001.
The situation in the country’s main robusta-growing areas
is a “disaster,” Ernesto Alvarez, chief executive officer of
Miami-based trader Coex Coffee International Inc., said in an
interview. Continued drought, mostly in Espirito Santo and parts
of Bahia and Minas states, will probably lead to a reduction of
as much as 50 percent for the harvest starting in the second
quarter of 2016, according to Coex, citing three company
agronomists who toured major growing areas recently.
“Demand for robusta is very strong both from outside buyers
as well as internal buyers in Brazil, thus high prices” Alvarez
said. Add in the expected drop in domestic production, “and we
have a very tight situation which is forcing internal buyers” to
switch to arabica beans.
Brazil is the second-largest producer of robusta after
Vietnam, which has shipped less of the coffee variety this year.
Robusta beans are typically used in instant coffee. Even when
converting Brazilian prices into dollars, thereby adjusting for
the weakening of the real through most of 2015, those numbers
are still higher since the end of July.
Robusta on ICE Futures Europe, meanwhile, has fallen this
year, closing on Wednesday at a two-year low, weighed down by
substantial global inventories and higher Brazilian export
volumes. Robusta for January delivery rose 3.2 percent to $1,555
a metric ton at 3:45 p.m in London.
Brazil’s coffee production was 42.15 million bags in 2015,
according to the government. Of that total, 10.9 million bags
were robusta, down from 11.3 million in 2014.
Brazilian exports of robusta surged to 3.77 million bags in
January to October, up 48 percent from a year earlier, data from
exporter group CeCafe shows. Brazil’s producers have been helped
on the international market by the weakness of the real.