Freak Frost Hits Heart Of Brazil's Coffee Belt, Damaging Crops
An unusual cold snap, with temperatures dropping to freezing levels in a matter of minutes, delivered a blow to the heart of Brazil's coffee belt, damaging trees and harming prospects for next year's crop, farmers have said.
Agricultural products across the western hemisphere have been beset by unusually bad weather - be it floods or extreme drought - all season.
Brazil is the world's largest coffee producer, as its climate is most conducive for production of the beans. Coffee prices surged nearly 13% in response to the frosts to a 6-1/2-year high.
The sudden frost happened on the morning of July 20, where, according to Brazil's National Meteorology Institute (Inmet), the minimum temperature in Minas Gerais was -1.2 Celsius (29 Fahrenheit).
Farmers, brokers, and analysts were assessing their crops on Wednesday after reports that the cold snap was much stronger than expected.
"I've never seen something like that. We knew it would be cold, we were monitoring, but temperatures suddenly went several degrees down when it was already early morning," said Mario Alvarenga, a coffee producer with two farms in Minas Gerais, Brazil's largest producing state.
Farmers shared pictures of their crops, where large black areas were visible in places where they should see dark green spots marking coffee trees.
"I will probably have to take out some 80,000 trees, they are burned all the way to the bottom," said Airton Gonçalves, who farms 100 hectares (247.11 acres) of coffee in Patrocinio, in the Cerrado region of Minas Gerais.
"I was going to the farm yesterday and a sensor in the truck started to alert me about ice on the road. I thought the system had gone crazy. But when I got to the farm, it was covered in ice, the roofs, the crops."
Gonçalves estimates his production in 2022 will fall to around 1,500 bags from the usual 5,500 bags.
Ana Carolina Alves Gomes, a coffee analyst at Minas Gerais agriculture federation Faemg, said frosts were reported also in the South of Minas Gerais and in the Mogiana area in Sao Paulo state.
"Only time will tell how much will be lost. We already had a small crop this year," she said.
Cooxupe, the world's largest coffee co-op and Brazil's largest exporter, said its agronomists were visiting farms on Wednesday to better assess potential damages. It plans to release a report in coming days.
Broker Thiago Cazarini, who operates in Varginha, South Minas, said that preliminary estimates from exporters and agronomists point to a potential reduction of 1 to 2 million bags in next year's crop.
"For a clearer view, proper time is needed. Next week it will be more accurate," he said.
The frost that struck Brazil's coffee has sparked fears of farmers defaulting on deliveries of recently-harvested coffee that were sold to commodities traders months ago at prices that now are half the current values.
Farmers may think twice about meeting their contract obligations for the current crop, said traders and analysts, as ICE futures for arabica have sky-rocketed.
"These farmers sold coffee for as low as 500 reais ($96.20)(per 60-kg bag)," said Judy Ganes, a US-based soft commodities analyst, adding that the worst drought in 90 years had already cut Brazilian coffee production.
Some farmers have sought to renegotiate prices with traders before the frost.
"The market was talking about defaults when prices were 40 cents below," said a European coffee trader who added the latest pricing "made the risk 10 times more likely."
Arabica coffee prices rose 10% on Thursday July 22 to $1.95 per pound, the highest in six-and-a-half years.
A broker who works with large international traders sourcing coffee in Minas Gerais, Brazil's largest producing state, said the physical market is frozen.
But, he added: "so far, we have not received any formal word from farmers saying they will not deliver."
Airton Gonçalves, who has nearly 400,000 coffee trees in Patrocinio, Minas Gerais, state said he delivered 1,500 bags to European trader Sucafina this week, a day before the July 20 frost. He had agreed months ago to sell that coffee on average for 640 reais per bag.
Brokers heard of offers in Minas Gerais on Thursday July 22 for 1,050 reais per bag, with no sellers.
Estimates on Thursday varied on possible losses to next year's crop as the market digests the damage.
Initial forecasts of a loss of one to two million bags quickly increased.
Brazilian exporter Guaxupe said it expects a cut of 4.5 million bags on initial projections of nearly 70 million bags for 2022 production.
Ganes, who has traveled to Brazil three times this year to check the drought and the frost, said it was too soon to speculate.
"There are a lot of aerial photos going around. But nobody knows if those trees will have to be only pruned, which will result in zero production next year, or need to be taken out, which means no production for two or three years," she said.
Eduardo Carvalhaes, a veteran coffee broker in the port city of Santos, in Brazil, said that coffee nurseries were also hit by the cold snap, which will complicate farmers' replanting plans.
Farmer Gonçalves, who believes he will need to take out around 80,000 burned trees, is not sure if he will find seedlings.
"I might need to plant corn in that area next year while I wait for trees to arrive in the market".