Brazil Coffee Demand May Rise to Record as Economic Growth Accelerates

Coffee demand in Brazil, the world’s largest producer, may rise more than expected this year as the economy grows at the fastest in 15 years, helping keep prices stay near a 12-year high, the head of an industry group said.

Consumption may rise to a record 19.6 million bags this year, more than the 19.3 million bags estimated at the beginning of the year and the 18.4 million bags consumed last year, Nathan Herszkowicz, executive director for Brazil’s Coffee Industry Association, known as Abic, said in an interview today.

“Coffee sales were surprising this year so we have a chance of beating our estimate,” Herszkowicz said by telephone from Sao Paulo.

Brazil’s economy expanded 9 percent in the first quarter, the most since the third quarter of 1995, driven by domestic demand and a surge in investment, the government said June 8. Rising demand for coffee will help prices stay near a 12-year high of $1.815 a pound on Aug. 2 in New York, he said.

Prices will remain high until at least the end of the year even as Brazilian production rises, according to Herszkowicz. Brazil’s crop may increase 23 percent to a record 55.3 million bags, as crops enter the more-productive phase of a biennial cycle, the U.S. Department of Agriculture said June 18.

“Market players signaled a new price level for coffee that came to stay and is not a consequence of volatility or speculation,” Herszkowicz said.

Arabica coffee for September delivery fell 0.15 cent, or 0.1 percent, to $1.6945 a pound at 13:24 a.m. on ICE Futures U.S. in New York.

Brazilians are increasing their coffee intake, adding take- out cappuccinos and espressos to the filtered coffee taken at home as the beverage industry invests more in advertising and new products, Herszkowicz said. The group expects consumption of better-quality coffee to increase 15 percent annually in Brazil, he said.

Brazil is the biggest consumer of coffee after the U.S.

To contact the reporter on this story: Katia Cortes in Brasilia at at kcortes@bloomberg.net

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