- Original 2014-2015 world Crop 153-155 million bags
- Consumption 146-147 million bags
- Balance +7 to +10 million bags
- Damages -8 to -10 million bags
- New World balance -2 to -3 million bags
Market Outlook
At the moment, and in our opinion, the market is working with an expected loss of approximately 8 to 10 million bags for the 2014 crop.
We believe that this number is also priced into the market. This includes not just the South of Minas but also the other coffee areas that were affected by the drought, compounded also by the higher than normal temperatures. One exception being the Conillon harvest which the consensus calls for an increase of 1 to 1.5 million bags.
However, the true reality of the crop, and losses, will be better ascertained as the harvest comes in over the next several weeks.
This harvesting and yield data along with the winter months in Brazil will be the next period of volatility in prices for the market. Winter has started earlier than normal this year, possibly suggesting an extended season, similar to that of the Northern hemisphere.
During the next 30 to 50 days, the market will be under a constant barrage of yield reports and estimates from different participants as the critical mass of the 2014 harvest emerges.
If the yields do not show an improvement as to the amount of cherries needed per 60-kg bags in the coming weeks, we will see this loss number increase and market prices will reflect this. If the yields do improve, from the present early harvest results and historical averages, we should see this loss number reduced and prices will subside.
Carryover stocks as well are being reported as larger than previously expected. These are from 2012-2013 and 2013-2014 crop years. This is part of the reason, along with much higher prices, for the strong export numbers.
2015 – 2016 Crop
It’s impossible to gauge the present crop even with the cherries on the trees and harvesting going on.
It would be extremely presumptuous for anyone to guesstimate a crop size for a 2015-2016 harvest that has not even flowered yet. There are a few factors, however, concerning producers and coops, though, which will inevitably affect the next crop.
Trees, during the growth period, need to generate enough new branch growth for the next flowering will take place and, eventually, for coffee cherries to develop. New growth has been reduced considerably.
By now, new growth should have been anywhere from 9 to 12 internodes (or pair of leaves). So far the number that we have seen in the south of Minas Gerais has been from 5 to 8 internodes.
The most important part of the growing season has passed and we are now entering the winter months, when plants go into a slower growing periods. Most do not believe we can recover the lost ground.
Added to this concern is plant fertilization that has taken place, or the lack thereof. Normally 4 rounds of fertilization take place. The first took place after harvest last year. The second round would have been applied sometime during the November to December period.
This round, many producers chose to postpone towards January-February as a way of pushing cost forward in light of the depressed coffee prices in November. In January and February, this fertilization round continued to be postponed as rain is needed for fertilization applications to work, and these months saw record-low rainfall levels.
This second round was not applied until the end of March and a third application was applied in April. Most producers have applied only three of the usual four applications and not in their due course in time.
El Niño
If El Niño is confirmed, this will bring an atypical rainy period for South America and dry conditions for South East Asia. For Brazil, if El Niño emerges, this would bring unneeded rainfall during the harvest season.
This weather pattern could bring detrimental conditions affecting quality and harvesting efforts which in turn would bring further deteriorating yield results for 2014-2015. The month of May would be critical for confirmation of El Niño.
For 2015-2016 El Nino would negatively affect the development of the plant and especially the expected flowering period window that would be expected from September 15th to October 15th.
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