Brazil's coffee output likely to fall

Brazil's coffee output this year should fall between 15 percent and 20 percent from the previous season, but production will make a strong recovery in 2018, the global head of coffee for Chinese commodities group COFCO told Reuters on Thursday. Joseph Reiner said COFCO's research team, after visiting several producing areas in the world's largest coffee producer, confirmed that most Brazilian farms will produce less due to the off-year in the biennial coffee cycle.
Brazil produced a record coffee crop of 51.37 million bags last year and trees usually produce less after a big harvest. "We've been to a lot of places, and most arabica producing regions will effectively have smaller outputs. Between 15 and 20 percent less, but I would say more like 15 percent less," said Reiner, who took the COFCO job this year after 11 years at US chocolate maker Mars.
The group's agricultural division, COFCO Agri, is working to integrate the Noble coffee operations in Brazil after it concluded the acquisition of the rival Asian commodities trader in March 2016. With that acquisition it became one of the 15 largest players in the Brazilian coffee export market.
Reiner said many coffee farmers decided to adopt severe pruning after the strong harvest last year, since they already expected a smaller production. That could reinforce the off-year in certain regions, but may prepare the fields well for 2018, when trees should be refreshed. "We have indications for a significantly larger crop in 2018," he said, adding that newly planted areas should also boost the trend.
This situation of a smaller crop in 2017 and potentially much bigger production in 2018 will create an "interesting situation" in the market, Reiner said, with a very tight supply expected early in 2018. Reiner said coffee consumers such as roasters will have to evaluate their stocks carefully to avoid shortages when the supply crunch comes or risk having excess supply when the 2018 crop starts to hit the market. COFCO has plans to increase its volumes in Brazil, but Reiner declined to give a target.
"We are going to use the tools the company has, our financial strength, logistics capacity, to give better service to clients," he said. Brazil's coffee export market is dominated by Cooxup, the world's largest cooperative for coffee farmers. Among the top five firms are Asian merchant Olam and local firms Terra Forte and ECOM.