A frosty spell in Brazil
angel barrera |
You have probably heard about it, the coffee industry has been turned upside down by a cold snap that hit Brazil and froze the coffee growing regions. This could compromise the production of 4 to 6 million bags for the next season (2022/2023). The current crop seems to be doing well. The Brazilians are expecting further cold spells in August. As a result, prices have gone into a tailspin, with the price of coffee rising to 220 USD cents per pound and then falling back to 190/195.These frost events in Brazil are not new and have always had a direct impact on international coffee prices, in a brutal way. In July 1975, as in 1994, frosts destroyed the current and future harvests and caused international coffee prices to rise to over USD 300 cents per pound (USD 6.60/kg) on two occasions. If this situation were transposed from 1975 to today, prices would probably more than double...Last week, a first frost affected all Brazilian coffee regions. The damage to the next harvest has yet to be measured, but the current campaign does not seem to be compromised. By November, after the rainy season, we will probably be able to estimate Brazilian production for the next harvest with more precise figures, in order to assess the real impact on international coffee prices. The coffee sector had a very difficult year: national strike in Colombia, civil conflict in Ethiopia, disruption of maritime transport and now added to that, frosts in Brazil... now more than ever, roasting friends, we must continue to think and act in the long term.
What does this really mean? It means that in the next 3 months, we will probably have a speculative market, but realistically, it will remain bullish. Coffee prices have been very low for the last 10 years and in the current context (pandemic, explosion of freight in Asia, national strike in Colombia, civil war in Ethiopia, increase in consumption due to the end of lockdowns...) it is not ready to come down.News from our friends at FAF who are preparing for the cold weather with the installation of greenhouses for the youngest coffee trees or the spraying of a potassium sulphite solution for the biggest.We send all our support to the Brazilian producers.Belco team