Cepea cautioned of the potential for a “major” arabica coffee crop disappointment in Brazil, as it noted a rise in domestic prices of the bean to a seven-month top – and its premium over robusta to a three-year high.
The research institute noted that Brazilian arabica prices “rose sharply” late last month, a rally it saw as supported by “the significant price rises in the international market as well as the US dollar appreciation against real”.
A stronger real raises the value in dollar terms of assets, such as coffee, over which Brazil has a large influence.
Cepea’s own arabica coffee price indicator gained 9.5% to R$434.39 per bag over the last 10 days of June, and made further headway on Monday to stand at R$440.87 per bag - the highest value since November.
‘Major crop failure’
However, the institute also flagged disappointment from the early results of the arabica harvest, which had reached half way in north western areas of Parana, and approaching that level in Garca central Sao Paulo too.
Other groups have reported strong harvest progress, with Minas Gerais-centred cooperative giant Cooxupe flagging that, even as of June 7, its associated farmers had harvested 26.7% of planted area, more than twice the 11.5% figure a year before.
It has forecast its growers producing 7.6m bags of coffee this year, down from 8.4m bags last year, a decrease that might be expected in an “off” year for Brazilian arabica output, which runs in a two-year cycle of alternate larger and smaller crops.
However, Cepea said that “yield at processing was lower than the expected in almost all regions”, a factor “which may lead to a major crop failure in 2019-20”.
‘Bad weather at flowering’
The comment stands in contrast to less downbeat ideas on the robusta harvest, with Cepea reporting that the harvest in the major robusta growing state of Rondonia, now more than 80% complete, had shown quality and damaged bean levels “similar to that in the 2018-19 crop”.
And it chimes with market comments that the harvest will come in well short of the 57m-60m bag levels expected by many observers, including Ecom, Rabobank and the US Department of Agriculture.
At US-based Price Futures, Jack Scoville said that “there is now a lot of talk that production will be much less than 50m bags.
“There was bad weather at flowering time and the harvest is reporting low yields and quality.”
Some commentators are less downbeat over harvest prospect, with official Parana farm office Deral reporting last week that 83% of unharvested state coffee crops were in good condition, 15% in average health and only 2% bad.
It stood by a forecast for Parana output, all of arabica beans, of 61,236 tonnes (1.02m bags), up 2.4% year on year.
Nonetheless, robusta prices have begun to underperform notably arabica values in Brazil, gaining a more modest 5.2% over the last 10 days of June.
Indeed, the premium of arabica prices over robusta values, as measured by Cepea, rose by 19.7% over the 10 days to end June at R$140.17.
On Monday, the premium rose further, to R$146.48 per bag – the highest since March 2016.