Report Highlights: 

Brazilian coffee production is forecast at 49.5 million bags for the 2014/15 marketing year, an 8 percent drop compared to the previous crop due to the negative impact of the prolonged drought and warm weather, especially in southern and eastern Minas Gerais and the state of Sao Paulo. Coffee exports for the corresponding year are forecast at 32.38 million bags, down 1 million bags from previous crop. Carry-over stocks are projected at 6.32 million bags, down more than 30 percent from the previous year.

Production 

The Agricultural Trade Office (ATO/Sao Paulo) forecasts the Brazilian coffee production for marketing year (MY) 2014/15 (July-June), at 49.5 million bags (60 kilograms per bag), green equivalent, an 8 percent decrease from revised figure for MY 2013/14 (53.7 million 60-kg bags). Information was collected from field trips, government sources, state departments of agriculture, growers’ associations, cooperatives and traders. 

In spite of the good Arabica coffee production potential for the upcoming crop given that the majority of the trees would be in the on-year of the biennial production cycle, the prolonged drought and high temperatures during January and February, especially in the states of Minas Gerais and Sao Paulo, significantly affected the filling and development of the beans. In addition, post contacts report significant tree eradication in the state of Parana as a consequence of last year’s frost and low prices in 2013, thus reducing the production potential for that state. 

At this moment, it is unclear to predict to what extent the aforementioned problems will affect the final size of the crop. A more precise number will be available only after the harvest when it will be possible to learn about the quality and weight of the beans. Post initial assessment projects Arabica trees production projected at 33.1 million bags, down 6.3 million 60-kg bags compared to revised figure for the previous year (39.4 million 60-kg bags). Arabica coffee harvest should begin in May/June. 

Robusta production is projected at 16.4 million 60-kg bags, a 2.1 million bags increase compared to revised production for MY 2013/14 (14.3 million bags), primarily due to the good production potential in Espirito Santo, Rondonia and Bahia. The robusta harvest began in March/April 

Post revised upward both the MY 2012/13 and MY 2013/14 coffee production estimates to 57.6 and 53.7 million bags, respectively, based on updated information from post contacts and revised supply and demand figures showing higher stock numbers than initially estimated for MY 2013/14. According to post contacts, roughly 90 percent of the Brazilian 2013/14 crop has already been marketed to date. Traders report that growers have taken advantage of the high prices in the last three months and have sold high volumes in the market.

In January 2014, the Brazilian government (GoB), through the Ministry of Agriculture, Livestock and Supply’s (MAPA) National Supply Company (CONAB), released its first survey projecting Brazilian coffee production for MY 2014/15. Total production is projected between 46.53 and 50.15 million 60-kg bags, a 2.62 reduction to a 1 million bag increase compared to the final estimate for MY 2013/14 (49.15 million bags – 38.29 million bags for Arabica and 10.86 million for Robusta coffee). 

CONAB projects arabica production between 35.07 and 37.53 million bags, whereas the robusta crop is estimated between 11.46 and 12.62 million bags. Note that the estimates do not take into account the prolonged drought in several coffee areas in the beginning of the year. CONAB is expected to release the second coffee survey for the 2014 crop on May 15. 

The Brazilian Institute of Geography and Statistics (IBGE) has also released its March 2014 coffee production forecast for MY 2014/15. The IBGE forecast for the 2014 coffee crop is 2,818,214 metric tons of coffee, or 46.97 million 60-kg coffee bags, a 3 percent drop compared to 2013 (2,918,652 metric tons or 48.65 million bags). 

Yields 

ATO/Sao Paulo projects the Brazilian coffee yield for MY 2014/15 at 23.68 bags/hectare, down 6 percent from MY 2013/14, due to adverse weather condition in the Arabica regions of Sao Paulo and Minas Gerais. 

Coffee Prices in the Domestic Market 

The Coffee Index price series released by the University of Sao Paulo’s Luiz de Queiroz College of Agriculture (ESALQ) follows. The series tracks coffee prices in the domestic spot market since September 1996. High stock levels led to depressed domestic coffee prices in 2013 both in local currency, the Real, as well as in U.S. dollars (US$ 134.05/bag in 2013 as opposed to US$ 201.14/bag in 2012). The depreciation of the real also contributed to lower coffee prices in U.S. dollars.

To provide support to coffee growers, the Brazilian government set option contract auctions during September and October 2013. An equivalent to 3 million 60-kg bags at R$ 343.00 were negotiated through the auctions providing the growers the right to sell the auctioned coffee to the government at the aforementioned price in March 2014 if market prices were below the set price. No grower exercised the option given that market prices were well above the reference price.

Consumption 

ATO/Sao Paulo forecasts the Brazilian coffee domestic consumption for MY 2014/15 stable at 20.1 million coffee bags (19 million bags of roast/ground and 1.1 million bags of soluble coffee, respectively). The likely increase of roasted/ground coffee prices at retail should prevent an increase in total Brazilian consumption. 

ABIC reports that the coffee industry processed 20.33 million bags, green equivalent, from November 2012 to October 2013, down 1 percent relative to the same period the year before due to slight competition from other ready to consume beverages for breakfast like juices, chocolate and soy-based products. Per capita consumption for 2013 is estimated at 4.87 kg of roasted coffee per person. 

ABIC estimates that sales for the roasting industry in 2013 were R$ 7.3 billion.

Trade 

Exports 

ATO/Sao Paulo projects total Brazilian coffee exports for MY 2014/15 at 32.38 million bags, down 1 million bags from previous season, due to lower expected supply of the product. Green bean exports are likely to account for 29 million bags, while soluble coffee exports are forecast at 3.35 million bags. 

Coffee exports for MY 2013/14 were revised upward to 33.38 million 60-kg bags, green beans, up 9 percent from previous estimate, based on year-to-date export volumes and anticipated May-June loadings. Post contacts report that coffee growers have taken advantage of the high market prices since January/February 2014 as a consequence of the prolonged drought in several coffee regions in Brazil and have steadily sold their products since then. Green bean (arabica and robusta) exports are estimated at 30 million bags, whereas soluble coffee exports are estimated at 3.35 million bags 

According to the March 2014 Coffee Market Report International released by the International Coffee Organization (ICO), total world coffee consumption for 2013 is preliminarily estimated at 145.8 million bags, up 3.8 million bags compared to 2012.

Total coffee exports during the July 2013 – March 2014 period were 24.83 million bags, a 1.81 million 60-kg bag increase compared to same period during MY 2012/13. Export sales from July 2013 through March 2014 total R$ 3.66 billion. Preliminary data show that coffee export registrations for April 2014 were 3.04 million bags while preliminary cumulative green coffee export shipments for April 2014 are 2.40 million bags.

Stocks 

Total ending stocks for MY 2014/15 are projected at 6.32 million bags, down 2.98 million bags from revised figure for MY 2013/14 (9.29 million bags), due to lower expected production. CONAB coffee stocks on November 31, 2013 are reported at 1.61 million bags. 

CONAB’s 2014 privately-owned stocks survey has not been released yet. The survey includes coffee stocks held by growers, coffee cooperatives; exporters, roasters and the soluble industry on March 31st. 

Policy 

In April 2014, the National Monetary Council (CMN) approved a total of R$ 2.925 billion to fund the 2014 coffee crop as follow: R$ 1.3 billion for stock operations; R$ 845 million for crop management; R$ 750 million for the coffee acquisition program; R$ 20 million for the recovery program for damaged coffee fields and R$ 10 million to finance future market operations