Bears feast on strong coffee crop forecast

A leading coffee trader upgraded its Brazilian crop figures for this year, adding to the increasing bearishness over supply forecasts from the world's largest producer of the commodity.

Volcafe, the Swiss coffee arm of ED & F Man said that after an extensive second crop tour in March and April lasting more than four weeks, it was raising its crop forecasts by 5 per cent to 51.9m bags - each bag containing 60kg of beans.

After the devastating drought in 2014, which depressed coffee production in Brazil, the focus has been on this year's harvest levels. "The conditions are pretty good. The high prices resulted in good farmer care that was completely neglected in 2014," said Keith Flury, head of research at Volcafe.

The numbers are at the high end of the forecast range. Coffee bulls, or those who see Brazilian output remaining at relatively low levels, are predicting figures as low as 45m bags.

Volcafe also increased its 2014 number from 47m bags to 49m, although it is still sharply lower than the 2013 production figure of 57.2m bags.

The trader said the high prices achieved last year had contributed to improved plant vigour this year, as they had made it possible to increase inputs such as fertilisers. Plentiful rains in February and March were also helping yields, it said.

The 2014 drought had hit trees that were fatigued after two years of bumper crops, and the low prices due to the good harvests meant there was little farmer care for the trees, exacerbating the plant stress.

Volcafe said it expected production for arabica, the higher quality coffee, to total 35.5m bags, up 16 per cent from 2014, while the output for conillon, the Brazilian robusta, the lower quality coffee, was expected to be at 16.4m, down 11 per cent.

The Volcafe numbers followed upward forecast revisions from Marex Spectron, the commodities broker, which also raised production and inventory estimates.

"Recent export data supports the view that our carry-out from 2013-14 was too low," said James Hearn, co-head of agriculture at Marex.

The continuing export sales from Brazilian growers have surprised many in the coffee markets and have prompted analysts to review their crop and production figures.

Marex raised its 2013 Brazilian figures by 1m bags to 56.3m bags and the closing inventories for the year from 11.15m bags to 12.15m.

ICE July arabica was trading almost unchanged on Tuesday afternoon, up 0.3 per cent at $1.333 a pound.

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