This month we look at Brazil as its harvest comes to an end in a year marked by the damaging frosts for Brazilian producers and market volatility felt across the industry. Read on for a look at the C Market and the ICO’s price indicator, a report on the frost including video from Ally Coffee COO Ricardo Pereira who was visiting coffee farms when the most recent frost hit, and a look ahead at what’s on the horizon for Ally Coffee in Brazil.
The World Market
C-Market Analysis
Source: Tradingview
In July, the C Market experienced some of the most volatile days it's seen in several years, including several concurrent days with 5–20 cents movement. On July 20th, the futures price broke $1.70/lb, a level which had acted as a resistance line for the market for four years. Over the rest of that day and the next the price went on to reach $2.15/lb, the highest market level since October 2014. The market failed to maintain this level, with prices plunging to $1.79/lb by the end of the month. At the time of writing the market is in the midst of a rally, with prices pressing against the $1.90/lb mark again.
Global Coffee Industry Statistics
Source: ICO Coffee Market Report, July 2021
- Coffee prices continued to increase in July 2021, bringing the price of Arabica to its highest level since November 2014
- Market volatility has increased as a result of growing concerns about current and future availability of coffee from many origins, including Brazil
- The ICO composite indicator reached a monthly average of 152.24 US cents/lb in July, a 43.8% increase over the beginning of the coffee year (Oct '20)
- This upward trend seems to confirm a recovery from the price crisis which began in 2017
See the ICO’s full summary with specific figures below for more details.
Coffee prices continued to increase in July 2021, with the Arabica variety reaching its highest levels since November 2014, as concerns grew about the current and future availability of many origins, especially the world’s largest producer, Brazil, which suffered a severe frost on July 20. As a result, market volatility increased. The monthly average of the ICO composite indicator reached 152.24 US cents/lb in July 2021, its highest level since 162.17 US cents/lb recorded in November 2014. Compared with the monthly average in October 2020, the beginning of the current coffee year, the level reached in July 2021 represents an increase of 43.8%. Prices of all four groups of coffee have recorded substantial increases. This upward trend of coffee prices over the first 10 months of coffee year 2020/21 seems to confirm a net recovery from the low-price levels that have dominated the world market since coffee year 2017/18. The price performance has also been driven by brighter prospects for demand, as pandemic-related restriction measures are being removed in major consuming markets and the development of vaccination programmes is enabling a progressive return to normal economic activity.
The monthly average of the ICO composite indicator rose by 7.9%, from 141.03 US cents/lb in June 2021 to 152.24 US cents/lb in July 2021. This level reached in July 2021 is 42.9% higher than that of July 2020 and represents the ninth consecutive month of increase and the highest monthly average since 162.17 US cents/lb recorded in November 2014. Compared to the monthly average of 99.05 US cents/lb registered in October 2020, the level of July 2021 represents a 43.8% increase. Figure 1 shows a pronounced shift from the low-price levels that
Truck at Fazenda Mimoso in the Oeste Baiano growing region of Brazil
At Origin
July Trip Report - Frost Impact in Brazil
In July, Ally Coffee COO Ricardo Pereira traveled to Brazil to visit partner farms and a number of facilities of Grupo Montesanto Tavares, Ally's parent company. During his visit, an unexpected and damaging frost fell across several growing regions, including Sul de Minas, Alta Mogiana, and Cerrado Mineiro.
The impact of the frost on coffee plants varied from place to place as elevations and other geographical features changed; some farms experienced little-to-no effect, while for others it affected nearly their entire operations. The long-term consequences of the damage also vary based on the age and health of the coffee plants themselves, with more mature trees likely to recover from the damage given enough time and care, while younger plants that were affected could have to be removed and replanted entirely. For farmers who have to replant their crop, it will be 3–4 years before they're able to harvest and sell their coffee again.
This frost comes on the heels of a significant drought in Brazil which was already predicted to have a negative impact on the upcoming coffee year. Coffee year 2022/23—a year that should be a boom year in Brazil's biennial coffee crop cycle—is expected to have lost 5 million bags of coffee following the frost.
Ricardo, who was born and raised in Brazil, had this to say upon seeing and experiencing the damage firsthand, "I personally have never seen anything like this and also never experienced this type of cold here in Brazil. My heart and prayers are with all of our producing friends here in Brazil.”
Below is a video that Ricardo recorded during a visit to a farm near Patrocínio in Cerrado Mineiro on the morning that the frost hit.
Ricardo sat down with Freda Yuan of the Coffee Roasters Guild on Friday, August 13th to talk about the frost, his experience during his visit, and his insights into what this could mean moving forward. Watch the replay of the conversation on the Coffee Roasters Guild IGTV.
You can tune in for another conversation about the frost in Brazil on Tuesday, August 17th at 11am EDT on Ally Coffee and Ally Open's Instagram accounts, where we'll talk about the impacts on some of our partner producers and take questions about this means for this coffee year and next.
Future Outlook for Ally Coffee in Brazil
Though coffee year 2021/22 is still expected to be a lean year for Brazilian coffee production, we’re looking forward to the return of fresh crop microlots and our classic Core Coffee Paubrasil in the coming months. We’re also thrilled to announce our newest Core Coffee offering: Paubrasil Washed!
Paubrasil Washed highlights a side of Brazilian coffee lesser-known than the popular Natural and Pulped Natural offerings that many people associate with the country, providing a “clean, sweet, and pleasant coffee” according to Amanda Oliveira, Ally Coffee’s Brazilian Green Coffee Buyer.
Paubrasil Washed comes to us from farms owned and operated by our parent company, Grupo Montesanto Tavares, allowing us another opportunity to work closely with our sibling companies and bring forward the value created by the vertically integrated business model used by GMT businesses. This year’s lot comes from Fazenda Mimoso, a 3,700 hectare property located in the Oeste Baiano growing region of Bahia state. Fazenda Mimoso adheres to the same principles that guide all GMT farms—using good agricultural and processing practices, healthy and human working conditions, and respect for the surrounding environment.
With new coffees and old favorites on the horizon, now is a good time to consider your upcoming needs for Brazilian coffees. Don’t hesitate to contact your account manager to start the conversation!