Brazil Drought Seen Easing as Cold Front Signals Rain

The Brazilian heat wave and drought threatening coffee crops and pushing up domestic hydropower prices will ease this week as a cold front approaching the country’s south brings showers, a government forecaster said.

The southern states of Parana and Santa Catarina, along with the southeastern state of Sao Paulo, will get rain by Feb. 13 and some southern areas will see showers as early as tomorrow, government meteorologist Joao Caetano Mancini said. Mato Grosso do Sul state in the west and Minas Gerais state north of Sao Paulo may also get rainfall this week, he said.

“As the cold front nears, it helps break a blockage caused by dry, hot air,” Mancini, an analyst at the government’s Inpe weather agency in Sao Jose dos Campos, Brazil, said today by phone. “We’ll tend to see the return of normal summer rain patterns.”

The worst drought and heat in decades triggered concern crops will be hurt in the world’s biggest exporter of coffee, sugar and soybeans, while parched pastures led to record cattle prices this week and low dam levels pushed up hydropower rates.

Brazilian soybean and corn growers will reap less than previously forecast as the hot, dry spell threatens output in several parts of the country, the government’s Conab agency said in its monthly oilseeds and grain report today.

Corn output this season is estimated at 75.5 million metric tons, down from 79 million forecast last month, Conab said. The soybean outlook, reduced to 90 million tons from 90.3 million, remains at a record level. The dryness may affect forecasts further in future reports, Conab President Rubens Rodrigues dos Santos told reporters in Brasilia.

No Clouds

“The formation of a high-pressure atmospheric system over Brazil has prevented the development of clouds,” the agency said in the report. “In the center-west and southeast regions, the low rainfall volume should prevail in February.”

Reduced rainfall may stem a decline in domestic agricultural prices recorded in past weeks, Jankiel Santos, chief economist at Banco Espirito Santo de Investimento in Sao Paulo, said by phone.

“We will tend to see higher prices further down the road if this drought persists,” Santos said.

Agricultural prices fell 2.1 percent in the 12 months through Jan. 31, according to the Getulio Vargas Foundation’s IGP-M inflation index.

The outlook for corn output was also cut because of reduced planting and the dryness may delay sowing of a second, off-season corn and soybean crop, Conab said.

Corn Yields

Estimated corn yields are down 1.9 percent from the previous season and may be cut further if the drought persists, Conab said.

Concern the drought will harm coffee and sugar crops pushed up international prices last week. Arabica coffee futures in New York had their biggest seven-day rally in almost 14 years and sugar’s 9.2 percent increase in the five days through Feb. 5 was the longest gaining streak since October.

Reports of wilted coffee beans because of dry soil have emerged throughout the country, Lucio Dias, commercial superintendent at the Cooxupe arabica growers cooperative said last week.

Coffee futures for March delivery rose 0.6 to $1.37 a pound on ICE Futures U.S. at 12:23 p.m. in New York. Sugar futures fell 0.8 percent, while soybeans rose 0.6 percent and corn declined 0.5 percent.

Before it's here, it's on the Bloomberg Terminal.