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Brazil Arabica Coffee Crop to Drop; Robusta Output Rises

Jan. 9 (Bloomberg) -- Coffee growers in top producer Brazil are forecast to harvest less of the arabica variety used in Starbucks Corp. and Nestle SA’s Nespresso blends after slumping prices led to reduced investment in crop additives and planting.

Producers will reap between 35.1 million and 37.5 million 60-kilogram (132-pound) bags of the mild-tasting variety this year, down from 38.3 million last year, even as most trees enter the higher-yielding half of a two-year cycle, the government said in a report today. This will be the first time since 2005 that arabica production will fall in a higher-yielding year.

Growers are reducing spending on their crops after a 48 percent slump in New York-traded arabica futures in three years, the second-worst performance among commodities, reduced income. The government’s report undermined confidence Brazil would have a record harvest, crop researcher Safras & Mercado’s Gil Barabach said.

“Numbers came below expectations and add a certain level of uncertainty to the market,” Barabach, a coffee analyst at Safras in Ponta Grossa, Brazil, said by telephone. “Everyone was very confident in a bumper crop.”

Arabica coffee contracts for March delivery rose as much as 0.3 percent to $1.213 a pound after the Brazilian report, paring earlier losses.

Output of robusta beans, mostly used in instant coffee, will rise to between 11.5 million and 12.6 million bags from 10.9 million, boosted by higher yields and a planting expansion in top robusta-producing state Espirito Santo, the government’s Conab agency said.

Below Expectations

Brazil’s total coffee output will be between 46.5 million and 50.2 million bags, according to Conab. Barabach said the market was initially expecting total output of as much as 60 million bags.

Excess rain in the top arabica-producing state of Minas Gerais may also pare output, Conab said. Concern the showers may hurt crops led coffee futures to rise in past days.

Brazilian coffee growers usually start harvesting in April.

To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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