US officials were overoptimistic even in pegging the Brazilian robusta coffee crop at a seven-year low, industry officials believe, as the dent to supplies helped local prices return above R$400 a bag.
The USDA two weeks ago, in a much-watched report, estimated the Brazilian robusta crop at 12.1m bags, a drop of 1.2m bags year on year, with the decline attributed to “above-average temperatures and prolonged dry spells in Espirito Santo”, the country’s top state for producing the variety.
“Water shortages continue to limit irrigation, a common practice in the state.”
However, even that figure, which would be the lowest since 2009, may be too big, according to a survey by research institute Cepea.
USDA vs Conab
“For robusta, most agents consulted… did not believe Brazil may produce 12.1m bags this crop as estimated by the USDA,” Cepea said.
“For them, the numbers from Conab were closer to reality,” with the Brazilian ag bureau pegging the harvest at 9.4m bags.
The comments represent a reversal of typical market thinking, with many investors viewing Conab forecasts as consistently underestimating crop size, and preferring to rely on data from private commentators or the USDA.
Indeed, on arabica beans, Cepea said that the USDA’s forecast of a 43.9m-bag crop was well received. Conab has pegged Brazilian arabica production at 40.3m bags.
The concerns over Brazilian robusta coffee production come towards the end of a harvest which Cepea said had come in with “damaged” quality, besides lower volumes.
“The dry weather in Espirito Santo reduced production,” the institute said, adding that in Rondonia, “the quality of beans harvested was low”.
And there are some concerns that the persistent drought could affect the 2017 harvest, in reducing the vegetative growth needed to support the crop.
Haroldo Bonfa, at consultancy Pharos Consulatoria, has reportedly said that Brazil’s “entire” robusta crop “may be compromised” if rains do not arrive in the second half of 2016.