Brazil's government raises coffee output estimate

Brazil's government made a slight increase of 0.3 percent to its estimate for coffee production in the 2010/11 harvest on Thursday, as a clearer picture emerges with most of the crop now already gathered. The agriculture ministry's crop supply agency Conab said the July/June harvest in the world's top coffee grower should turn out 47.2 million 60-kg bags, up 0.3 percent or 160,000 bags from the 47.04 million bags estimated in May.
That is an increase of 20 percent from last year's 39.5 million bags, according to Conab, but such fluctuations are normal because of a biennial cycle which causes output to rise one year then fall the next. Coffee futures contracts have soared recently, reaching a 13-1/4 year high on Wednesday before retreating early on Thursday, propelled by fund buying amid fears that dry weather could cut output in Brazil next year and an uncertain supply/demand balance.
The December arabica contract was trading at 192.95 dollar cents per lb at 1343 GMT. A year ago, the price was 136 cents. Arabica, which makes up three quarters of Brazil's coffee output, was estimated at 36 million bags versus 35.31 estimated in May. The robusta crop, which suffered drought in the main growing state Espirito Santo early in the year, was estimated at 11.2 million bags, down from 11.74 million previously.
The crop would fall short of the record 2002/03 crop which produced 48.48 million bags, according to Conab figures. Many producers said they were disappointed by the small size of beans which meant more were needed to fill a bag of coffee. Traders have been working with much higher estimates for this year's coffee crop, of between 50 and 55 million bags. They say Conab's estimates are consistently below theirs.
Coffee trees are due to begin flowering for next year's 2011/12 harvest, which will fall in a lower output year in the biennial cycle, but there is no forecast for rain as yet and forecasters expect the La Nina weather anomaly could keep the region dry at the time when the rainy season usually begins.