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Coffee farms in Brazil's top growing region of Cerrado Mineiro report damage to 60% of the region's entire area. (Photo courtesy of Fernando Barboso.)
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The frost damage to Brazil's coffee growing areas is so extensive that major replanting will be required. A regular production cycle will not be achieved until 2025. (Photo courtesy of Fernando Barboso.)
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There are many photos and video evidence of the extensive frost damage in Brazil. Here are large areas of Southern Minas left destroyed. (Photo courtesy of Fernando Barboso.)
The global coffee trade enters an unexpected wave of turmoil as the coldest weather in years hit Brazil, the world’s largest coffee producing and exporting country, leading to the most severe damage seen in the country’s growing regions in over 40 years, growers and traders told STiR coffee and tea in early August. The damage is so severe that even though current overall figures point to 10-15% damage of the South American giant’s arabica coffee area. The timeline for either pruning – or, as in many cases entire replanting of fields – will be impossible to catch up with until the 2025 production cycle, agricultural experts said.
Arabica futures at 7-year high
Losses from the frost damage continue to grow as more detailed reports emerge from agronomists and agricultural researchers conducting field research across Brazil. This comes at a particularly sensitive time for the world coffee market as supply is running low against an already small harvest in Brazil and consumer demand is booming against low inventories and stocks, according to figures and data from the International Coffee Organization (ICO) and the U.S. Department of Agriculture (USDA).
The unexpected severity of the frost in Brazil sent arabica futures at the ICE exchange in New York soaring to 7-year highs over $2.20 per pound in late July before profit taking took over. But prices remain trading in the 1.80-1.90 range and is expected to roar back to over $2.00/lb. in the short to medium term, and possibly even reaching $3.00/lb. for the first time since 2010, commodity analyst Judith Ganes told local press in Brazil including Reuters and Bloomberg in late July.
By the end of July estimates and projections from both private and official sources in Brazil said that while frost damage would reduce totals 2-4 million 60-kilogram bags, more significant damage of between 8-10 million 60-kilogram bags of coffee could be lost because of frost damage in the next 2022 harvest.
And this comes on top of the already small off-cycle crop being harvested in 2021. Days before the fourth cold front in a month hit Brazil by July 29th, Brazil’s official crop supply agency Conab said as much as 200,000 hectares – or approximately 11% of this year’s total cultivated area – was negatively hit by the frost. The Minasul Cooperative based in Varginha in southern Minas told local Brazil media that as much as 30% of Brazil’s entire arabica growing areas were likely affected by the freezing temperatures for extended periods of time once all the damage reporting is completed.
At least 3-4 years of uncertainty in fresh coffee supply
The damage from the frost is unprecedented. For multiple reasons, the numbers of losses as well as overall impact on the Brazilian production cycle will have much more long-term effect than what the initial figures reveal, said agronomists and market analysts. There is agreement by sources that the market should be prepared for at least 3-4 years of critical supply problems as it will be until 2024-2025 before Brazil’s coffee regions will recover from the extent of the frost damage.
“In the best-case scenario we are three years away from seeing a full recovery to Brazil’s production cycle," said Jonas Ferraresso, an argonomist who himself has a small coffee farm of three hectares in the sate of São Paulo. "But more likely it will not be possible to see all the areas affected re-planted until the harvest in 2025 as it is already too late for most farms to contemplate replanting in the next year.”
Many farms will have to re-plant and will do so gradually over 2-3 years
Seeds for new coffee seedlings are planted by May-June at the latest for the plants to be ready to be transferred to the fields in the February-March planting season, Ferraresso told STiR in excusive comments. He adds that not only is it “too risky” to conduct replanting after March as Brazil enters the dry season with limited rainfall, but also that many “coffee plant nurseries were damaged as well and there just is not enough plant material for all the areas requiring replanting” to be able to do so during 2022 – even if farmers have access to financing. For those able to prune damaged fields, some production will bounce back by the 2023 harvest season, but most of the farms that will have to replant will do so gradually between 2022-2024, and that part of Brazil’s coffee production will not recover in full until the 2025 harvest cycle, he said.
The current situation causes devastation for Brazilian farmers, who pinned their hopes on a big recovery next year from the current small-cycle crop. This crop is not only recovering from massive stress to trees after last year’s record harvest of between 68-69 million bags, but saw yields cut further short by the biggest drought in 90 years which reduced the 2021 harvest to one of the smallest in 10 years, pegged to reach 49-55 million bags. But this was before the frost hit between the end of June and end of July, and more cold weather with potential for freezing temperatures are forecast through the first week of August.
Roasters may be forced to buy coffee on a day-by-day basis
Speaking to STiR in exclusive comments traders, growers, agronomists, and exporters said the magnitude of damage will leave the market in a precarious situation, as roasters and buyers will push stocks to its limit in order to cover positions ahead of the next harvest, and if even the slightest additional damage — such as further frosts in Brazil, issues with the new flowering season that start in October, or any other weather problems in producing areas elsewhere in the world — can potentially push the deficit into a situation where roasters will have to buy on a day-by-day basis based on fresh supply reaching the market.
The massive cold wave that brought damaging frost to Brazilian coffee fields since the end of June provoked heavy snow across at least 14 different cities in southern Brazil in late July, and severe damage was reported across the state of Minas Gerais - which alone accounts for between 50-60% of Brazil’s entire coffee harvest in an average cycle - as well as the states of São Paulo and Parana.
Less percentage damage than 1994-1995, but global consumption today is doubled
“This is the worst frost to hit Brazil’s coffee industry since 1978," said Fernando Barbosa, himself a grower in the key southern Minas coffee region and a long-time insdustry advocate who works with multiple grower groups across Brazil. "We are very sad by these events and the producers are devastated, many growers are in shock to see all their work been reduced to nothing overnight.”
While the overall scope of frost damage in percentage of the crop may still turn out to be less than the 1994-1995 frosts, which were the last time a major frost season in Brazil causing the global coffee market to go into an extended frenzy of panic buying, the overall impact for the 2021-2022 crop years is more significant as global demand today is over double what it was then, market analysts said.