Arabica coffee futures fell back below 200 cents a pound
after Volcafe turned less gloomy on Brazilian coffee output, lifting
expectations for production in Colombia and Vietnam too.
The influential analysis group, part of the ED&F Man commodity
trading empire, lifted by 2.5m bags to 142.7m bags its forecast for world
coffee production in 2014-15.
The upgrade reflected an increase to 47.0m bags in the
estimate for output from Brazil, the top producing country – a figure 1.1m
tonnes higher than previously expected, if still a drop of 10.2m bags year on
year thanks to prolonged dry weather in the country's coffee belt.
"Harvest yields have confirmed our initial worries, and the
Arabica crop, at 29.5m bags, is set to be the lowest since 2007," Volcafe said.
However, yields in Minas Gerais, Brazil's top coffee-producing
state, almost all of arabica beans, had proven "better than expected", with the
estimate for output of conillon, a robusta type grown mainly in Espirito Santo,
The upgraded Volcafe figure, while well below market
estimates approaching 60m bags common before drought hit late in 2013, is towards
the higher end of the range of market expectations.
Conab, the official Brazilian crop bureau, forecasts
production of 44.5m bags, and ProCafe of some 41.7m bags, although CoffeeNetwork,
part of INTL FCStone, two weeks ago stuck by an estimate of 50m bags.
However, Volcafe highlighted the potential for the after-effects
of the drought to reduce Brazil's coffee production potential in 2015 too,
given that next year's cherries will be carried on vegetation grown this year,
but which has been stunted by lack of rain.
"While it is too early to attempt a 2015 forecast, it is
clear that the condition of the coffee trees in Brazil just ahead of the main
flowering is poor," Volcafe said.
"It is the possibility of a further deficit in 2015-16 that
keeps prices elevated and the market on edge."
Volcafe also lifted its forecast for coffee output in
2014-15 in Vietnam - the second-ranked producing country, but mainly a grower
of robusta beans – by 500,000 bags to 28.5m bags, if remaining below last
seasons' record 30.0m-bag crop.
"While substitution to pepper production, as well as a
frost in the north, has been negative for output in the coming season, good
robusta prices have by and large supported input use and renovation," the group
And the estimate for Colombian production was lifted by 1.0m
bags to 12.0m bags, reflecting the boost to output from a replanting programme
which started late in the last decade.
Volcafe estimated at 8.8m bags the shortfall in world output
behind consumption in 2014-15, below a previous estimate of 11.3m bags, and
following two seasons of production surplus totalling nearly 15m bags.
Arabica coffee for December stood 1.6% lower at 199.05 cents
a pound in New York at 10:45 local time (15:45 UK time).
Robusta coffee for November was 0.2% lower at $2,087 a tonne