Brazil and Colombia Seen by ICO Making Up for Coffee Rust Losses

Coffee output in Brazil and Colombia, the largest arabica producers, will probably make up for leaf rust losses in Central America and Mexico for now, according to the International Coffee Organization.

Brazil, the largest producer, will help make up for losses due to large crops and bigger stockpiles, Mauricio Galindo, head of operations at the ICO, said in an interview in London yesterday. Colombia will have a bigger crop, he said.

Brazil “has pretty consistent supply” because it has been able to minimize production changes from one year to the next in its two-year coffee cycle, Galindo, former head of agricultural commodities research at JPMorgan Chase & Co., said. “The fact that Colombia has gone to replant 70 percent of trees by now, it should start increasing productivity substantially already in this crop year. Certainly the big jump we will see is in 2013-14.”

Arabica coffee futures have dropped 2.1 percent this year as new harvests added to global stockpiles. Inventories in warehouses monitored by ICE Futures U.S. in New York climbed 1 million bags last year and are up another 135,937 bags in 2013.

Leaf rust losses in Central America and Mexico are estimated at 4 million to 5 million bags in 2012-13, said Ricardo Villanueva, president of ICO’s private sector committee. It may take up to 10 years for Central America production to make up the damage, Galindo said.

Output in Colombia will be 2.3 million bags bigger this year at 10 million bags, Luis Genaro Munoz, the head of the National Federation of Coffee Growers, estimated last month. The ICO has raised its forecast for 2012-13 production to 8.5 million bags from 8 million bags, Galindo said.

Brazil Stockpiles

In Brazil, output will be a record 47 million to 48 million bags for an off-year in the two-year cycle, according to farmer cooperative Cooparaiso. That compares with 50.8 million bags last year and 43.1 million bags two years ago, according to Conab, Brazil’s forecasting agency. Stockpiles stood at 28.4 million bags as of Jan. 1, according to Terra Forte Exportacao e Importacao de Cafe Ltda., a Brazil exporter.

Growers in Colombia have been striking since Feb. 25 as lower coffee prices and a higher peso reduced income. The peso appreciated 9.7 percent against the U.S. dollar last year. It was the third best performing emerging market currency, after Polish zloty and the Hungarian forint, data on Bloomberg showed.

Growers in Colombia, which once got a minimum price for their beans, want this system to be reinstated, according to Galindo. The government has offered to raise subsidies to growers until the end of the year, researcher F.O. Licht GmbH said in a report e-mailed March 4.

Coffee exports from the Andean nation have not yet been affected as warehouses that store the beans at ports were well- stocked, said Galindo, who is from Colombia.

“If they finish soon and they find a compromise, I don’t think at this point it will affect production,” Galindo said. “Of course if it goes on and on and in June we are still in this situation, then of course yes.”

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.

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