Coffee farmers in the world’s top producer, Brazil, have been shielded to some extent from the sharp fall in arabica prices by rising yields, traders said on Thursday. Lower prices are compensated by much higher yields, said Carlos Brando, director at P&A Marketing International, the speciality coffee and coffee machine exporter.

P&A data shows that average Brazilian coffee yields have nearly doubled to 20-22 60kg bags per hectare over the past decade. “There is often too much emphasis on prices and too little emphasis on yields. What really counts for the grower is income and profits for his pocket,” Brando said at the World Coffee Outlook in Geneva.

However, falling arabica prices could pose a threat to Brazil’s ability to build on yields in future. Arabica coffee has been one of the worst-performing commodities this year, shedding about 30 percent in value to hit a two-year low last week of $1.5010 per lb as Brazil’s large crop weighed on prices. “Brazil has good yields, but the Brazilian farmer might reduce investment if prices are not covering the cost of production,” one trader said.

The official government estimate for this year’s on-year crop in Brazil’s biennial crop cycle is a record 50.45 million bags, up from 48.09 million bags in 2010/11. Private traders, whose estimates typically exceed the government view, forecast Brazil’s current on-year crop will reach a record of about 55 million bags.

Brando said that Brazil’s production increase is a result of greater coffee yields rather than an increase in planted area. “In spite of lower prices for coffee in Brazil, Brazilian growers have higher profits than counterparts in Colombia, Costa Rica and El Salvador (where yields are lower),” Brando said. Traders estimated the cost of production for Brazilian arabica at $1.10-$1.40 per lb. Benchmark ICE September arabica futures traded down 1.7 cents, or 1 percent, at $1.6315 per lb at 1002 GMT.

Source: Business Recorder