Brazilian producers optimistic about the 2023/24 cycle

Brazil accounts for 38% of world coffee production. Given the importance of this shareholding, it is vital to focus on the progress and volume of the current cycle, because of the impact it will have on world prices.

After two consecutive years of disappointing harvests, the 23/24 cycle is shaping up to be very good, thanks to a good climate with plenty of rain. The trees were pruned 2 years ago and are very healthy.

As far as the growers are concerned, they have built up enough capital to invest in inputs, and so feed the plants as they should.

I've just returned from this country, where the growers are particularly optimistic. The area under Conilon is increasing and volumes are likely to grow strongly and rapidly over the next few years.

Larger-than-average beans

Thanks to good rainfall, the sieve for the 23/24 harvest is already expected to be larger than average. The final volume is estimated at 66.4 million 60kg bags by the USDA.

Production is expected to be split between 44.7 million bags of Arabicas and 21.7 million bags of Conilon.

The dry, sunny conditions of recent weeks have enabled the harvest to reach a record 82% of potential by mid-August. That's just over 7% up on the same period last year. 

The volume harvested, combined with the depreciation of the Real, explains to a large extent the downward movement we have seen since the beginning of August, reaching its lowest level since June 2021.

One caveat, however

Rain has fallen in some regions, leading to a first flowering which, because of the harvest in progress, could be lost and therefore reduce the potential for 24/25.

Most observers are forecasting a record potential of over 70 million bags. For this to happen, the rains will have to arrive in good time from the end of September/beginning of October.

The arrival of adequate rainfall in time and volume will send the market to new lows. Otherwise, a drought would set the market alight again.