The drought has forced a prematurely end to the crushing season, which already experienced in the past fortnights performance drops of 42% compared to last year.
Zafranet.com reports that "... Sugar production in Brazil, the world's largest exporter of the raw material, is slowing rapidly due to a drought this year which will provoke an early end to the milling season in the coming weeks, said the Union of Sugarcane Industry in Brazil, Unica, on Tuesday. "
Volcafé, one of the largest traders in the world, has announced that its production will be 10% lower than the previous season, due to the effects of drought in Brazil.
After fluctuating for 4 weeks, the price of contracts with terms of one month for the arabica variety rose to $215 on April 23rd.
Bloomberg reports that "the global harvest, including the variety of robusta beans, will be 11 million bags short of meeting global demand, estimates Volcafe. That means a global deficit which is equivalent to the production of Colombia, the second largest supplier of arabica in the world. ".
The variety of coffee which is considered the best quality, is starting to have disadvantages compared to the robusta variety, both due to changes in consumer trends, as well as price.
This is the warning given by experts who gathered in Sao Paulo, Brazil. According to the manager of the research firm Olam Europe, Neil Rossner, the Central American countries affected by the rust blight, "failed to meet the challenge presented by Brazil and Vietnam", the world's largest producers of grain. "The Arabica segment is in crisis and the gourmet coffee strategy is threatened," he added.
Losses caused by the rust disease in Honduras amount to 1.8 million bags, 650,000 quintals in Guatemala, 600,000 in Nicaragua, 400,000 in El Salvador, 200,000 in Costa Rica and 60,000 in Panama.
Those are the estimates of the Central American Organization of Coffee Exporters (ORCECA), who was unwilling to speculate on how much income the region would not receive because of declining exports.
$300 million will be required for pest control alone, and more than $1 billion to renovate the plantations that have been affected.
The figures which have been gathered unofficially indicated that in excess of 1.7 million quintals of coffee have been destroyed by the fungus known as rust in Honduras, Nicaragua and El Salvador.
The president of the Coffee Exporters Association of Honduras (Adecafeh), Omar Acosta says that the loss in Honduras could reach two million quintals, "The Ihcafé says that no damage has been done, butwe do not understand why they are lying. They should have a plan for the country because it is a serious problem, we all know that there is a strong impact from rust and we believe there is a damage of between 25% and 30% of the crop, which amounts to two million quintals. "
The disease is advancing steadily, with no public or private plans in place to combat the scourge, which is making its greatest appearance since the seventies.
Laprensa.com.ni reports on the destructive influence of the "Roya" blight on coffee plantations in Nicaragua, but the drama is being experienced with similar intensity throughout Central America.
Affected by the rains and a renovation program that is beginning to bear fruit, the 2012 harvest will only be 8 million bags, far from the target of 8.5 million.
Colombia reduces 2012 coffee production target and sees difficulty in achieving 2013’s
Colombia has reduced its coffee production target to 8 million 60kg bags as a result of adverse weather conditions and the crop replacement program, according to the National Federation of Coffee Growers.
The European Union is an alternative market for the export of roots and tubers, which traditionally have the United States as their main target.
From the introduction of a market report on roots and tubers in the European Union by the Costa Rican Foreign Trade Promotion Office (PROCOMER):
The Costa Rica Foreign Trade Promotion Office, through the Directorate of Commercial Intelligence carried out the present study in order to investigate the consumption of roots and tubers in the European Union (EU), a market which could be considered an alternative for export of these products.
The Brazilian coffee crop, which could amount to more than 50 million quintals of grain, could put prices back down again.
Faced with the prospect of a bumper crop of coffee in Brazil, Raul Amador Torres, a senior market analyst says, "The international price of coffee has improved a little and might be quoted at $190 per quintal, however, the trend is that it will go down again ... "
The level of global sugar prices will depend on the resilience of Brazil's 2012 crop, which in 2011 fell for the first time in 10 years.
In 2010/2011, the Brazilian sugar crop fell for the first time in 10 years, causing a drop in world sugar prices. Forecasts for the recovery of Brazil’s high production levels are mixed.
Ivan Melo Filho, director of Raizen, a joint venture between the Brazillian company Cosan and Royal Dutch Shell, said they expect cane production in south-central Brazil this year to be about 535 million tonnes, given the maintenance work and replanting in the area.
The forecasted decline in global supply signals the end of a period of plentiful harvests and the beginning of an upturn in prices.
International operators expect a reduction in world sugar production in the next harvest, which will mean the end of the abundance of the product since 2007, and they are keeping an eye on Brazil and India, the world's largest producers.
Following a review of the crops in Brazil and Vietnam, the world's largest producers, a decline of 4% in world production is projected.
Other influences include the crisis in Europe, one of the largest buyers of the grain, and flooding in Colombia which has produced crop losses.
"World production is something we should worry about", said Roberio Oliveira Silva, executive director of the International Coffee Organization (ICO), in a press conference in Ho Chi Minh City.
Central American producers will benefit from an increase in export quotas to the northern country.
The damage caused by drought to sugar cane in Mexico, a leading provider to the U.S., has meant a reduction in supply by 200 thousand metric tons, therefore, according to an analysis published by The Wall Street Journal- import quotas assigned to Central American countries will be increased in order to meet domestic demand.
The country has already seen 180,000 hundredweight of beans arrive on its shores this year, 40% more than in the same period in 2010, which has stabilized prices.
On April 20, 75% of the 90,000 hundred weight bean shipment will arrive, which have been purchased from China, according to Guillermo López Suárez, head of El Salvador's Agriculture and Farming Ministry (MAG in Spanish). The rest is due at the end of the month or the beginning of May.