Friday, September 5, 2014

Coffee set for largest shortage in 9 years

By Morgane Lapeyre

Coffee (NYBOT:KCV4) is set for the largest shortage in nine years as drought shrinks the crop in Brazil, the biggest grower, according to Volcafe Ltd.

Demand will exceed production by 8.8 million bags in the 12 months starting Oct. 1, the most since 2005-06, the Winterthur, Switzerland-based unit of commodities trader ED&F Man Holdings Ltd. said in a report e-mailed today. The surplus was 7 million bags in 2013-14. Brazil’s arabica crop will be 29.5 million bags in 2014-15, the smallest in seven years.

“The condition of the coffee trees in Brazil, just ahead of the main flowering, is poor,” Volcafe said, referring to next year’s crop. “The vast rainfall deficit in the arabica areas of Brazil has negatively impacted vegetative growth and yield potential.”

Arabica coffee prices jumped 83 percent this year as dry weather damaged trees carrying this year’s harvest. The surge forced buyers including J.M. Smucker Co., maker of Folgers, the best-selling U.S. brand, to raise retail prices.

Global production will fall 8.1 percent to 142.7 million bags, a three-year low, as consumption climbs 2 percent to 151.5 million bags, Volcafe said.

The Brazil crop estimate was raised to 47 million bags from 45.5 million bags in May, partly because of a larger robusta crop, according to the report. The arabica deficit will be 6.9 million bags and robusta 1.9 million bags.

The estimate of Brazil’s robusta output was raised to 17.5 million bags from 17.1 million bags, while Indonesia’s robusta production is seen falling to 7.5 million bags from 10.5 million bags last year. Vietnam, the world’s largest robusta grower, will produce 27.5 million bags of the beans, down from 28.8 million bags a year earlier, Volcafe said.

Production in Colombia, the second-biggest arabica grower, will rise to 12 million bags from a previous estimate of 11.5 million bags, it said. The next crop stands to benefit from the best conditions in six seasons, after a tree renovation program boosted output from 7 million bags in 2011-12, Volcafe said.

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