Bloomberg News

Brazil's Coffee Output Seen Making Up for Vietnam Decline

August 06, 2012

A 13 percent increase in coffee output in Brazil, the world’s largest producer, will compensate for weaker crops in Vietnam and Colombia, Citigroup Inc. said.

Farmers in Brazil may harvest 56 million bags in the 2012-13 season under way there, the bank said in a report dated yesterday. Production in Vietnam may drop 10 percent in the season that starts in October, according to a Bloomberg survey. The crop in Colombia will be unchanged at 7.5 million bags next season, still below the 2007-08 level of 12.5 million bags, data from the U.S. Department of Agriculture showed.

Coffee growers in Brazil have gathered 70 percent of this year’s crop after dry weather helped speed up the harvest, according to brokers Flavour Coffee and Cazarini Trading Co. Rains in June and early last month delayed the start of the season, which will end a month later this year, according to Cepea, a University of Sao Paulo research group.

“The Brazilian coffee harvest has progressed at a strong clip and has increased availabilities of the caffeinated bean,” Citibank analysts including Aakash Doshi said in the report.

Arabica coffee has fallen 23 percent in New York so far this year on speculation of increased supplies from Brazil. The beans rose to a 14-year high in May last year. Colombia is the second-biggest producer of the arabica variety, favored for specialty drinks such as those made by Starbucks Corp. (SBUX:US) Vietnam is the biggest grower of robusta beans, used in instant coffee and espresso. A bag of coffee weighs 60 kilograms (132 pounds).

“Coffee farmers have turned their attention to harvesting, looking to make up for part of the time lost,” Escritorio Carvalhaes, a Santos, Brazil-based broker, said in a report e- mailed Aug. 3. “Producers are hoping that the rains forecast for the second half of August won’t arrive.”

Ending stocks of arabica beans will rise 8 percent from the previous cycle as the Brazilian harvest recovers after being delayed by rains, Citigroup said. Global consumption will be unchanged at 139 million bags, the bank said.

“Expectations are for coffee markets to get modestly stronger in 2013,” Doshi said.

Arabica coffee for September delivery gained 0.7 percent to $1.7505 a pound by 7:47 a.m. on the ICE Futures U.S. in New York.

To contact the reporters on this story: Isis Almeida in London at Ialmeida3@bloomberg.net Jessica Abrahams in London at jabrahams7@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


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