Brazil's gourmet coffee ambitions sodden by rains
Weeks of wet weather at the outset of Brazil's coffee harvest have slashed its potential to produce smoother, wet-processed beans, limiting gourmet supplies and reinforcing some roasters' recent efforts to get by with inferior produce.
Concerns over the quality of Brazil's crop this year fed into a 3.4 percent leap in the price of arabica futures on Tuesday on New York's ICE exchange, taking prices to their highest in nearly six weeks with a close at $1.8045 per lb.
Brazil's coffee crop is in the midst of a high-output year in the plant's biennial cycle, with production rising and falling from one season to the next. Exporters forecast a large though sub-record crop, but due to rain, the slice of top-notch beans will be much smaller than hoped.
"This was going to be fine-grade coffee," said Airton Rodrigues Costa, trade and coffee grading manager at the Cocapec cooperative in Franca, Sao Paulo, as a lamp he used to inspect a bean sample revealed white stains -- an indication of damp.
"It's exportable but no longer has the potential it would have had," he said, observing a "more acetic" smell from a number of rain-damaged beans one cooperative member had delivered to be classified and priced.
The rain's impact was hard to quantify, said Lucio Dias, a trader at Brazil's biggest coffee cooperative in the main coffee state Minas Gerais, whose members produce about a tenth of the country's crop.
"The fine coffees and semi-washed were the worst-hit," Dias said.
"People have been working very hard to get a slice of this market so this year it's a big setback," he said, adding that producers were sweeping up large quantities of coffee fruit knocked to the ground by the rains, detracting from the taste.
Enthused by strong foreign demand, Brazilian producers have been investing heavily in the last few years in equipment for wet-processing -- a method that yields smoother-tasting beans and typically a 10-15 percent price premium.
Roasters have been turning to Brazil for wet-processed beans after a run of bad harvests in Colombia kept gourmet coffee prices painfully high in the last two years, prompting many to tweak blends to incorporate more lower-cost produce.
Unlike "natural" coffees whose beans dry inside the fruit casing in which they grow, that shell is stripped from the bean in wet-processing and the mucilage that remains ferments on the bean's surface, imparting a smooth taste.
Most of Brazil's arabica beans are natural, or unwashed.
Colombia remains the top producer of washed arabica beans, which are grown at high altitude and renowned for their quality, but a combination of heavy rains and tree renovation cut the country's output by about a third over the past four years.
Between 2008 and 2011, Colombia harvested an average of 8.4 million 60-kg bags annually, compared with more than 12.5 million bags in previous years, International Coffee Organization data shows.
Higher-end beans have been in short supply in the last few years as developing nations' rising wealth draws them into this market segment -- like in Brazil itself, where table-top espresso machines have become fashionable in homes and offices. Supply growth, on the other hand, has been slow.
The dent in potential output of high-end coffees also coincides with Brazil's debut as an approved origin for delivery to New York's ICE futures exchange against the "C" coffee contract from March 2013, a right that the country has heralded as recognition of its efforts to raise the bar on quality.
Producers are allowed to begin sending their coffee for ICE certification to the exchange's warehouses as of last month, though at a fixed discount of 9 cents per lb. Prices on the cash market are higher, all but ruling out deliveries to the exchange at the moment.
No official figures for Brazil's semi-washed production exist but local industry sources estimate it at 3.5 million to 5 million bags, or up to 10 percent of the crop. Costa's guesstimate was that 6 percent could be wet-processed this year.
Broker Eduardo Carvalhaes from the long-established Carvalhaes brokerage in the port town of Santos said the market could react in two ways to a squeeze on quality beans, meaning a surge in prices of gourmet coffee may be averted.
"It's hard to say whether they will pay more for it or spend more on (less costly) natural coffees, which is something that could also happen with the difficulties the European and United States' economies are in," Carvalhaes said.
With much of the fruit having over-ripened, it has potential only as an unprocessed, "natural" bean, the still-respectable grade for which Brazil is best known.