How Does La Niña Affect Coffee Development in Brazil?

Three consecutive years of La Niña have cut coffee output in Brazil, the largest producer, with the 2023 harvest outlook weak. Drought also lowered export volumes in Uganda, Africa's largest coffee exporter. Global consumption keeps recovering from the pandemic, so supply is tightening while demand grows, and futures prices stay high. Traders have started stockpiling spot beans.

La Niña is a climate pattern of abnormally low sea surface temperatures in the eastern and central equatorial Pacific. It shifts rainfall, deepening drought in southern Brazil and bringing flooding to the north. This round began around September 2019 and intensified after April. Coffee trees in main growing regions suffered, and soybeans and corn crops are also expected to fare poorly.

Brazil, the world's largest coffee producer, is being battered by three consecutive years of La Niña, with output in its main growing regions falling sharply and the outlook for the 2023 harvest far from optimistic. Meanwhile, Uganda, Africa's largest coffee exporter, has also seen its export volume decline due to drought, while data from the International Coffee Organization shows that global coffee consumption has continued to recover since the pandemic. With tightening supply compounded by recovering demand, coffee futures prices remain high, and domestic traders have begun stockpiling spot beans. This article will review the production declines in Brazil and Uganda, the mechanisms by which weather is affecting them, and changes in the supply-demand landscape of the global coffee market, and will include Front Street Coffee's specialty bean recommendations for readers' reference.

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According to a recent CCTV News report, Brazil, as the world's largest coffee producer, is seeing a significant shrinkage in its coffee harvest. Crops in the Southern Hemisphere are currently at a critical stage of growth, yet the La Niña phenomenon sitting over the Pacific has persisted for three consecutive years without receding. The market generally believes that this year Brazil will not only face a coffee production decline, but also is very likely to see poor harvests of major crops such as soybeans and corn.

The so-called La Niña phenomenon refers to a climate state in which sea surface temperatures in the eastern and central equatorial Pacific remain abnormally low. It alters temperature and precipitation distribution, intensifying drought in some areas and causing frequent flooding in others. This round of La Niña in Brazil began around September 2019, maintained mild to moderate intensity for most of the period thereafter, and gradually became more severe after April this year.

Brazilian agricultural meteorologist Dos Os Santos pointed out that once La Niña appears, the whole of Brazil is affected, manifesting as a sharp drop in precipitation in the south and flooding in the north. During the summer-autumn harvest season of 2021 to 2022, south-central Brazil experienced severe drought, while the north was hit by continuous heavy rain.

The report noted that Caconde, located in São Paulo state in southern Brazil, is the region's largest coffee-producing area, where 85% of total annual income comes from coffee bean sales. In good harvest years, annual coffee bean output here can approach 14,000 tons. But after more than three consecutive years of being dragged down by La Niña, local market participants predict that by the May 2023 harvest season, the region's total coffee bean output may plunge to less than 10,000 tons.

Ademar Pereira, chairman of the Caconde rural association in Brazil, revealed that three years ago the producing area could harvest 50 bags of coffee beans per hectare, but now only 15 bags per hectare. Hail, frost, water shortages, and high temperatures have appeared in turn, and years of severe weather have caused a sharp drop in coffee bean production. Weather problems have become the most widespread concern among Brazilian coffee growers.

Right now is a critical moment when coffee trees are bearing fruit and need sufficient water, yet the La Niña phenomenon has made recent rainfall in Brazil markedly lower than in the same period in previous years, which will have a very serious negative impact on the yield and quality of Brazil's coffee beans next year.

Public information shows that Brazil is a world-renowned coffee-producing region and the world's largest coffee producer and exporter, accounting for about one-third of the world's total output and occupying a pivotal position in the coffee trading market. A production decline in Brazil will tighten supply across the entire market, cause global coffee bean prices to rise significantly, and keep coffee futures at high levels. Domestic coffee traders are actively stockpiling spot beans to safeguard domestic market demand.

Brazil is not the only country dragged down by severe weather. Uganda, Africa's largest coffee exporter, saw its coffee bean exports at about 503,000 bags last month, down 14% year on year, according to a Xinhua News Agency report. The Uganda Coffee Development Authority said drought caused coffee bean production to fall in most parts of the country, and shortened the coffee bean harvest season in the central and eastern regions, which is the main reason for the decline in export volume.

Data from the International Coffee Organization shows that in the 2021-2022 coffee year, total global coffee production was 167.2 million bags (60 kg per bag), down 2.1% from 170.83 million bags the previous year; while global coffee consumption rose 3.3% to 170.3 million bags. As inventories decline in the largest coffee-producing country and the harvest outlook darkens, global coffee consumption is recovering from the market trough caused by the pandemic, yet it has no choice but to face uncertainty on the supply side in Brazil and Africa.

Image source: Internet

The above content is compiled by CoffeeHunters, a coffee news website.