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STARBUCKS CORPORATION

(SBUX)
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Frosts stain Brazil coffee belt, growers see nearly a third of fields hit

07/30/2021 | 12:07pm EDT

VARGINHA, BRAZIL, July 30 (Reuters) - Flying over the coffee region in the south of top Brazilian producer state Minas Gerais, it is possible to see brownish spots stain large parts of the fields, signs that the worst cold snap in nearly three decades will hurt production for at least the next two crops.

"It was worse than I imagined... It's hard to see a field that hasn't suffered any damage," said agronomist Adriano de Rezende, technical coordinator at the Minasul coffee cooperative, after seeing from above for the first time the farms in Varginha and other areas in Minas, such as Eloi Mendes, Paraguaçu, Alfenas, Machado, Boa Esperança e Carmo da Cachoeira.

After inspecting the fields from above on Thursday, the agronomist estimated that between 20% and 30% of the crops were hit by the unusually cold temperatures that reached the region on July 20 in the worst frost since 1994, according to farmers and analysts.

Minasul operates in important production centers in the south of Minas Gerais, a region that accounted for around 40% of arabica coffee production in Brazil in 2020. Arabica is the main type used by large coffee companies such as Starbucks and Nestle.

Another key producing region, the Cerrado Mineiro, has also been severely impacted.

The frosts in Brazil, the world's largest producer and exporter of coffee, sent prices in New York sky-rocketing to above $2 per pound for the first time since 2014 earlier this week.

Despite estimating the area hit by the cold, Rezende believes it is early to estimate production losses precisely, as more frosts were expected.

He also said that the intensity of the burning by the cold varies even in the same field in a farm, what makes the evaluation harder.

"But it is a fact that 2022 will not be an on-year" he commented, referring to the biannual production cycle of arabica coffee which alternates years of high and lower production, since trees get stressed after a large crop and produce less the following year.

Brazil is currently in an off-year, with production seen at around 55 million 60-kg bags by analysts, down from around 70 million bags in 2020. The worst drought in 90 years has also impacted output.

A larger production in 2022 was considered key by analysts to guarantee a balanced global supply next year, as consumption grows around the world due to the reopening of coffee shops after coronavirus-related restrictions.

FALLING LEAVES

Back on the ground, and while visiting the Mato Dentro farm in Varginha along with Reuters, the agronomist said that in a month's time, all the burned leaves will be on the ground, which will make it easier to check how bad the trees were damaged.

The more heavily damaged trees will need a heavy pruning, which means they will only produce again after two years.

Farmer Flavio Figueiredo de Rezende, who produces coffee in Varginha and Carmo da Cachoeira, said that before the frosts, he was expecting a near record production in 2022.

"But now, if we produce the same as this year's, it would be already good. It is sad, but that is part of our struggle".

More frosts were reported on Friday in several areas in Brazil, as a new polar mass advances through the center-south region.

But the farmer said the damage will not increase much, since the same areas are likely to be hit.

Jose Marcos Rafael Magalhaes, Minasul's president, who is also a farmer, said that most of the production potential for coming crops was lost.

He also said that a lot of coffee seedlings, which became key for the recovery work ahead, were also burned by the cold.

"The recovery will take long. Beyond the damage to young trees, there are no seedlings to plant or expand," he said.

Magalhaes estimates the coffee sector in Minas Gerais will loose 5 billion to 6 billion reais ($971.5 million-$1.17 billion) due to lost production. ($1 = 5.1469 reais) (Reporting by Roberto Samora Writing by Ana Mano and Marcelo Teixeira Editing by Marguerita Choy)


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
EURO / BRAZILIAN REAL (EUR/BRL) 0.05% 6.2473 Delayed Quote.-2.35%
NESTLÉ S.A. -0.52% 113.78 Delayed Quote.9.71%
S&P GSCI COFFEE INDEX -2.04% 140.6239 Delayed Quote.45.34%
STARBUCKS CORPORATION -1.40% 111.82 Delayed Quote.4.52%
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