Why We Talk About Brazil

By Kyle Newkirk — Vice President of Global Sourcing and Commodity Risk Management

 

Coffee roasters and buyers can NEVER stop talking about Brazil! Of course it’s a beautiful country with fantastic people and amazing beaches, but why are we so fixated on this South American agricultural giant when it comes to coffee?

Here are a few key reasons:

  • Brazil is the largest coffee producer in the world
  • Two-thirds of Brazil’s production is Arabica coffee, one-third is Robusta (called Conilons in Brazil)
  • They produce 2.5 times more Arabica coffee than the next largest producer, Colombia

It’s difficult to understand the size, scale and scope of Brazilian coffee production but let’s give it a go. Brazil is like the Iowa of coffee. Unlike in other countries where coffee is traditionally hand-picked, the majority of coffee in Brazil is machine harvested on large farms and stored in huge bins.

Coffee people measure a country’s production in bags which are 60 kilograms or 132 lbs. of green coffee. Brazil’s production on a year-to-year basis ranges between 45 million to as much as 60 million bags of coffee — that is 6 to 8 BILLION pounds or enough for around 200 BILLION 12 oz. cups of coffee annually. Of that coffee, about 30 million bags are Arabica, versus the entire Colombian production of about 13 million bags of Arabica — making Brazil THE Arabica powerhouse.

It’s so much coffee that when there is a hiccup in Brazilian production the coffee futures market can see a lot of volatility — which is affecting the market today. Brazil is currently in their harvest season, and last week cooperatives and other exporters from Brazil began to reduce their production estimates from around 48-50 million bags to 46-48 million bags, with some estimates even lower. This decrease is due to the harvest of smaller coffee beans that were affected by a drought that hit Brazil last January and February.

For perspective, a reduction of 3 million bags from Brazil would be like losing the entire production of Guatemala — and the reduction in crop estimates has caused the coffee futures market to jump almost $0.15 in the last couple of weeks!

So, keep an eye on news from Brazil to understand where coffee prices might be headed!

For further analysis on current coffee and tea market data, take a look at the weekly reports from S&D’s commodities team.