Coffee prices could surge soon as La Nina heat scorches world’s largest crop supply
Prices of coffee, this year’s worst-performing major agricultural commodity, may get a boost from La Nina as the weather phenomenon threatens Brazil’s next crop.
After a bumper 2020 harvest, La Nina is escalating the risk of a decline in output next year as most crops, already dry from months of below-average rain, endure scorching temperatures.
La Nina occurs when the surface of the Pacific Ocean cools, triggering an atmospheric chain reaction that stands to roil weather around the globe. In Brazil, an agricultural powerhouse, very dry and hot weather is clouding the outlook for everything from arabica coffee to oranges, sugar, and soybeans. In Colombia, another coffee-growing country, La Nina tends to bring adverse above-average rains.
Contrasting the worrying scenes of wilting flowers in Brazilian coffee trees is the record-high pace of the country’s exports after cooler and wetter conditions favored growers last year. Strong Brazilian shipments at a time of weak consumption because of pandemic lockdowns help explain why arabica futures are down 16% this year, more than any other major farm commodity. During the last big La Nina, prices surged as much as 127% between 2010 and 2012.
“The situation is very bad with trees withering intensively every day,” Regis Ricco Alves, a director at consulting firm RR Consultoria Rural, said from Minas Gerais, Brazil’s biggest coffee-producing state.
No rain is forecast for the next 10 days in coffee-growing areas, with temperatures seen hitting record highs. This week, temperatures may reach 35 degrees Celsius (95 Fahrenheit), according to Somar Meteorologia. Even those crops that benefited from rain in the past week have only had 30 millimeters (1.2 inch) this month, 40% of what was expected.
At this time of year, trees should be flowering for next year’s harvest. But the first flowering in August has been lost in many regions and conditions for new flowering are poor. Flowers turn into cherries that contain arabica beans, the smooth-tasting kind preferred by Starbucks.
Givago Miranda, a farmer in the Tres Pontas municipality of Minas Gerais, said his trees are withering and turning yellow, with buds getting “cooked” before opening in some cases.
“The potential for the next crop is now certainly 5% to 10% smaller,” he said.
In the Mogiana region of Sao Paulo state, farmer Rodrigo de Freitas registered just 4 millimeters of rain in August and the same amount in September. April through June was also dry. Even with irrigation and even if good precipitation comes by Oct. 10 as forecast, the damage may already have been done.
“The situation is getting severe with even the more resistant adult crops getting hurt,” Alves said.
For soybeans, La Nina is deemed as less threatening for the world’s biggest producer of the oilseed. Weather has been drier than normal in most Brazilian growing regions, delaying planting. But regular rains are expected from the second week of October, bringing favorable conditions for seeding and crop development, according to Celso Oliveira, a meteorologist at Somar. In fact, weather models signal a wetter summer compared with the previous season, when Brazil reaped a record crop.
Still, some parts of Rio Grande do Sul state, in the nation’s far south, may face excessive dryness in the most susceptible stage for the crop, while the Matopiba region may also see adverse conditions. But not enough to prevent another bumper soybean crop.
Soy delays may have some consequences for corn and cotton planted just after the oilseed harvest. The Pacific is expected to warm in the middle of next year, which may result in drier-than-normal weather from April in central Brazil.
“Crops may lack rain during the autumn,“ Oliveira said.