Brazil frost damage in focus as global coffee forum kicks off

CAMPINAS, Brazil (Reuters) - Brazilian coffee farmers expect damage to their crops due to frosts in recent days, but investors are nevertheless keeping their expectations for record production in 2020, generating debate at the 2nd Global Coffee Producers Forum on Wednesday.

FILE PHOTO: A worker arranges harvested coffee cherries inside a tractor in a plantation in the town of Sao Joao da Boa Vista in Sao Paulo state, Brazil, June 6, 2019. REUTERS/Amanda Perobelli

Brazilian producers and cooperatives say that damage to next year’s crop is very likely, although they were still assessing how intense and extensive the frosts were. Market participants see only minor risk of problems.

Arabica prices rose in New York in the days before the frosts, but fell in the sessions following news of the weather, as investors cashed in gains. Eventual price increases ahead will largely depend on the results of damage assessments.

“The frosts were not very strong, but there will certainly be some impacts to production,” said Carlos Augusto de Melo, president of Cooxupé, the world’s largest coffee farmers cooperative and Brazil’s No. 1 coffee exporter.

Jose Marcos Magalhaes, head of cooperative Minasul, which receives coffee from almost 200 municipalities in Brazil’s main producing area, sees a reduction of at least 5% in the initial projections for next year’s crop.

Despite gaining due to frosts, global prices remain near historically low levels, barely covering production costs for many producers.

Expectations for another record production in Brazil in 2020, when the country returns to the on-year in arabica’s biennial production cycle, have helped to keep a lid on prices rising, despite signs of falling production in other countries as some farmers abandon crops.

“You can forget that record,” said César Jordão, a coffee producer and member of the Monteccer cooperative in the Cerrado region, Minas Gerais state. “We are going to lose at least 10% of expected production,” he said.

Several producers had pictures of their frost-burned coffee fields to show around, as was the case with Osvaldo Bachião Filho, Cooxupé’s vice president, who said 50 hectares of his farm were severely hit.

Investors seem to have a different view.

A Brazilian consultant who advises a U.S.-based hedge fund that invests in futures contracts said that production impact will be minimal.

“Frosts only burned the leaves in the top of trees. Those will fall, but the tree will recover and be ready for the flowering,” he said, asking not to be named because he was not authorized to speak publicly.

The consultant said expectations for another record production out of Brazil next year “are intact.”

Reporting by Marcelo Teixeira; Editing by Susan Thomas