Coffee prices soared to a two-year high after Volcafe cut its hopes for the Brazilian crop, and raised its estimate for the world production deficit, forecasting another shortfall in 2015-16.
The influential coffee merchant, part of the ED&F Man commodities empire, cut its forecast for the Brazilian arabica coffee crop, the world's biggest, by 6.2m bags to 28.4m bags, warning that early-2014 drought had "negatively affected the bean formation stage of crop development".
While the group raised its estimate for Brazil's robusta coffee production by 1.0m bags to 17.1m bags, citing "improved expectations of yield" for a crop which has greater access to irrigation, the overall Brazilian harvest was downgraded to 45.5m bags.
Although the some other observers have lower estimates, with Brazil's CNC producers' group estimating the harvest at 40.1m-43.3m bags, Volcafe is viewed by many investors as an important commentator.
Indeed, Volcafe's late-January estimate of a 50.7m-bag harvest, downgraded from a November figure of 60m bags, was a key spark to the rally which has lifted New York arabica coffee futures by some two-thirds since then.
Swiss-based Volcafe raised its estimate for the world production deficit in 2014-15 to 11m bags, from 6.5m bag, and cautioned over another shortfall the following season too.
The 2015 coffee crop will be borne on branches grown this year, which bear the flowers which emerge around September, from which cherries develop.
"The recent unprecedented weather has affected both the 2014-15 and 2015-16 crops," the broker said.
"Even under the most optimistic scenario for the 2015-16 Brazil crop, we expect a second consecutive coffee market deficit in that season."
The downgrade came amid forecasts for rain for Brazil's coffee belt, of which "nearly all" is expected to enjoy precipitation this week, according to weather group Somar.
In fact, much of the coffee belt, with the exception of parts of the cerrado of Minas Gerais, the top producing state, and outlying plantations in states of Bahia and Rondonia have received normal, or above-average rains, this month.
However, the precipitation has come too late to repair much damage from a dry spell which left the belt with rains much below average in the first three months of the year.
Indeed, "the harvest has started early due to advanced maturation of the beans, and some harvesting has already been done in some areas," Jack Price at US broker Price Futures said.
"The main part of the harvest could start in early May instead of the end of the month as would be normal."
Arabica coffee futures for May delivery hit 213.20 cents a pound in New York, the highest for a spot contract since February 2012, before easing back to 208.65 cents a pound in late deals, up 6.1% on the day.
The better-traded July contract was 5.5% higher at 201.15 cents a pound.
"It's pretty hard to know what damage has actually been done in Brazil, until we get a good feel for the harvest," a European trader told Agrimoney.com.
"But Volcafe's estimates are likely to be seen as more reliable than some others."