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Brazil's coffee flowering divides arabica, robusta

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Cepea underlined how Brazil's unusual weather is affecting arabica coffee prospects far more than robusta plantations, even as US giant JM Smucker acknowledged the impact of higher bean costs.

For Brazilian robusta growers, who have already finished their 2014 harvest, the flowering observed this month is "as expected" on timing terms, and is proving promising in its extent, said Cepea, the research centre linked to Sao Paulo University.

Indeed, the first blossoming seen in the robusta-growing areas of Espirito Santo and Rondonia has proven "good", industry sources told the institute, adding that second flowering is imminent.

However, for arabica plantations, the first flowering over the past month, which is usually not observed until "late August and early September", is less than ideal.

'Some flowers pulled out'

The early arabica tree blossoming - "a result of an extended period of [drought] stress, followed by rains in late July", earlier than usual in Brazil's coffee belt - comes with a greater risk of flowers aborting, if follow-up rains are not forthcoming.

It has also in some areas coincided with the latter stages of the arabica harvest, meaning some losses in the process.

Sources told Cepea that in "the same plant that blossoming was observed, some coffee berries are still left to be harvested.

"As a result, in crops that are harvested by machines, some flowers were also pulled out."

Price divergence

Cepea said that it was still too early to rule out crops from further blossoming, although added that "it is important to highlight that the dry weather observed at the beginning of 2014 could have reduced the productive potential of coffee crops for 2015-16".

Coffee beans in any harvest are borne on vegetation grown the year before.

Cepea highlighted that prices of benchmark type 6 arabica beans in Sao Paulo had risen by 2.3% so far this month, to R$441.83 ($191.15) per bag.

The price of type 6 robusta beans had fallen by 2.3% to R$246.21 ($108.75) per bag.

This year's drought too has affected more output in arabica areas than robusta ones, which have been less badly affected by dryness and are more likely to have irrigation, has been told.

'Higher coffee costs'

The comments came as JM Smucker, the biggest coffee roaster, acknowledged that buoyant bean prices, lifted by Brazil's production woes, had reduced its cashflow in the May-to-July period.

"This decline is primarily attributable to a greater current year use of cash for working capital needs reflecting higher green coffee costs and ending inventory," Mark Belgya, the group's finance director, told investors.

The group has raised the prices of its products to offset higher costs, although the uplift came too late to prevent sales in the Smucker coffee division falling 2.3% to $502.7m in the latest quarter.

"While we announced a 9% list price increase on the majority of our portfolio in June, pricing on committed promotional programs, along with continued price investment to remain competitive on shelf, temporarily delayed the impact," chief operating officer Vince Byrd said.

"We expect full reflection of the price increase in the second [August-to-October] quarter."


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