Brazil Coffee Loss Seen Less Severe Than Forecast, Minister Says

Jun 02, 2014 11:00 pm ET

June 3 (Bloomberg) -- Brazil coffee growers may face less severe losses than officially estimated as the first harvested beans indicate that rains last month reduced the impact of the worst drought in 50 years, the agriculture minister said.

Brazil’s crop forecasting agency Conab reduced last month its estimate for this year’s coffee output to 44.6 million bags, from a January forecast of 46.5 million to 50.2 million bags. The forecast may be revised by the end of the harvest, Minister Neri Geller said in interview yesterday. Each bag weighs 60 kilograms (132 pounds).

“I’m not going to give figures, but we expect that the output can be higher than that,” Geller said in an interview from his office in Brasilia. “And growers manage to take good care of the trees because the prices have gone up, so we will have a bumper crop for next year.”

High temperatures and low rainfall in growing areas have fueled a 55 percent surge in prices this year and are expected to cut output for the mild-tasting arabica beans used in blends for Starbucks Corp. and Nestle SA by 16 percent to 32.2 million bags from 38.3 million last year, according to Conab.

Geller also said a proposed auction of coffee stockpiles that was published in the official gazette is on hold and may take place by the end of the year.

“What we have is the authorization to do the auction, but we will only do this if prices somehow have a major spike, to avoid inflation pressures,” Geller said. “The price level at which we will decide on the auction will be set in meetings with the coffee industry.”

Ethanol Mix

Brazil’s government is considering raising to 27.5 percent from 25 percent the ethanol mix in gasoline, with a decision possible by the end of the year, according to Geller. That could help state-run Petroleo Brasileiro SA reduce fuel imports.

“This is a request by the sugar industry, and everything that could be done here in the agriculture ministry has been done,” Geller said. “Now it’s up to the energy and finance ministries.”

The decision would be similar to a measure taken last week by the government to raise to 7 percent the biodiesel mix in diesel.

“The biodiesel mix was an agriculture ministry victory and will help boost soybean output for the next crop,” he said.