Espírito Santo, a little known state in southeastern Brazil, is known for its tropical beaches and mountainous nature preserves. Founded in 1551, the capital and port city Vitória has a compact colonial-era center. Across narrow Vitória Bay lies Vila Velha, site of Praia da Costa, a famous beach getaway, and to the 16th-century Penha Convent, offering sweeping views from its steep perch. They have been adversely affected by drought for the last 2 years and there is talk of a recent ban on Robusta coffee exports that is driving coffee prices.
Some big time rains have hit key Arabica coffee areas this past week, but I remain concerned about the main Robusta coffee areas in Ne Brazil (Espiritio Santo) and what continues to be a slow end to the Vietnam coffee harvest. This has been one of the wettest winters ever for Vietnam; this after a drought a year ago from El Nino decimated irrigation operations and lowered acreage and production.
According to Bloomberg, Arthur Heleodoro Covre, a fifth-generation farmer who’s planted 2,500 hectares (6,178 acres) of robusta across eight farms in the northern part of Espirito Santo, said that he was only able to pump enough water for about 30 percent of his crops before the new ban.
Covre had initially estimated his harvest would reach 30,000 bags in the season that starts in April, but the drought means he will fall short of the forecast by at least 5 percent, he said in a telephone interview from Pinheiros municipality. A bag weighs 60 kilograms, or 132 pounds.
While there is some rainfall improvement for the higher quality Brazil Arabica blends, if we get into a hot, dry weather pattern again in February, given the fact that Robusta coffee beans around the world are harder to find (these beans are used in instant coffee and grown in Indonesia, Vietnam and NE Brazil), any major collapse in coffee prices in the weeks ahead is probably unlikely. More coffee roasters are using arabica blends given the global tightness in Robusta.
Traders will be watching weather forecast patterns both for Argentina soybeans and for Brazil and Vietnam coffee in the weeks ahead. This will greatly affect prices. Will it dry out in flooded northern Argentina, will southern Argentina which will see hot,- dry weather, cool off and will NE Brazil get rains easing the drought and export restrictions for Robusta coffee? This is what the market will focus on.
ROEMER—GROWING JANUARY WEATHER PROBLEMS FOR ARGENTINA CROPS; ITS NOT JUST LA NINA–TOO WET IN THE NORTH, TOO DRY IN THE SOUTH
While everyone always talks about El Nino, El Nino or La Nina, La Nina, there are other teleconnections at least as correlated with rainfall in Argentina, and for that matter, many parts of the world. The AAO has been very negative over Antarctica and the warm TSA/SAT regions around west Africa are strong signals that southern Argentina soybean and corn areas will have problems throughout January. These other teleconnections relate to ocean temperatures and what is happening with the jet stream over Antarctica.
These features (thousands of miles away) can affect weather in many parts of the globe.
Northern areas however, may continue to have too much rain lowering crop prospects for Argentina grains.
Due to client obligations, I will not be able to comment frequently with respect to other soybean areas in South American and its impact on the grain market in the weeks ahead.
JANUARY WEATHER IN ARGENTINA AND CLIMATECH—RAINFALL TENDS TO BE BELOW NORMAL IN SOUTHERN ARGENTINA (SEE TABLE TO THE RIGHT)
LISTEN TO AUDIO—-It is possible coffee prices could be near a low given some dryness in NE Brazil and too wet for the Vietnam Harvest
Historical Coffee Spreads between Robusta/Arabica–More flooding to Vietnam coffee may keep Robusta prices strong in the short term vs big production in Brazil hurting the NY coffee contract
After a modest rally in crude oil on the heels of lower Opec production announcements, the world is still awash in oil. While other factors over other than weather is at play, it may take major cold in Europe, the U.S. and China to shore up the flood of oil in the weeks ahead. The U.S. weather pattern is very volatile due to a changing weak La Nina; good Eurasian snow cover that usually results in blocking and colder winter risks in the U.S., versus other factors. Overall, this will make trading weather in the energy market volatile in the weeks ahead with the trend being 1-2 weeks of cold U.S. weather, warming, then cold again. It is possible that within a week or so, models may once again show a pattern change towards colder weather if the EPO and NAO/AO index becomes negative again. Models are not showing this, but the atmosphere is in a different state than it was a year ago with a lot colder weather over Eurasia and Canada
HELPING YOU MAKE THE BEST INVESTMENT DECISIONS BASED ON THE WEATHER
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