(Recasts with context, adds additional quotes)
By Gustavo Bonato
SAO PAULO, April 10 Brazil has enough coffee
stocks to supply exports and domestic demand this year even
though a severe drought will result in a lower-than-expected
harvest, the nation's coffee industry association Abic said on
The association said its initial forecast for a crop of 47
million 60-kilogram bags may be further reduced when the extent
of damage in the world's top producer becomes clearer.
Even so, "the harvest is going to be large enough to supply
the domestic market and exports," Nathan Herszkowicz, executive
director of Abic, said at an event in Sao Paulo.
The extent of the damage to crops is still not known and
market participants have said a global surplus of almost 5
million bags will cushion some of the damage to supplies.
But the long dry spell or drought, which has almost doubled
the price of arabica coffee in two months, is expected to hurt
cherry growth and has coincided with a devastating leaf rust
that has swept across Central American, hurting yields there.
Brazil grows roughly 40 percent of the world's arabica,
which forms the backbone of most major commercial blends used in
household names including Folgers.
Arabica coffee prices rose to their highest in more
than two years on Thursday on rising concerns over the drought.
Brazil's national coffee council last week forecast
production of between 40.1 million and 43.3 million bags, which
would be Brazil's smallest crop in five years.
(For a FACTBOX on forecasts for Brazil's coffee crop, click
In January, before the worst of the drought, the government
forecast a coffee crop of between 46.5 and 50.2 million bags
compared with 49.2 million bags a year earlier. Crop supply
agency Conab will issue a new forecast in May.
"Some regions had more damage than others, but the extent is
still not known," Herszkowicz said. "We don't want to
over-dramatize the situation."
A study from the state of Minas Gerais, which produces half
of Brazil's coffee, showed that as much as 45 percent of the
crop may have been damaged by the drought.
Brazil exported 31 million bags of coffee in 2013 and
another 20 million were consumed domestically, according to
Abic. The country's official coffee stock figures will be
updated later this month, but as of March 2013 Brazil had 14
million bags on hand.
Exporter Comexim said on April 2 that those stocks would
likely fall to 11.5 million bags by July 1. Analysts are saying
the drought will likely cause significant damage to beans meant
to be harvested in 2015, meaning stocks could be further
pressured in future years.
Though it won't trigger a supply shortage this year, the
smaller crop will likely cause domestic prices of coffee to rise
35 percent over the course of 2014 compared with the end of
2013, Herszkowicz said.
Even so, domestic consumption should not be affected, as
prices of the beverage are still considered reasonable in
Brazil, he said.
"In 20 years, the price of coffee rose just 60 percent, well
below inflation," Herszkowicz said.
Local coffee consumption in 2013 fell for the first time in
10 years, to 20 million bags, or 40 percent of the 2013 crop,
Abic said in February.
In addition to Arabica coffee, Brazilians consume conilon,
the local version of robusta, which is generally not exported.
The country's coffee association Cecafe expects total exports to
rise 6 percent this year.
(Writing by Caroline Stauffer; Editing by Lisa Von Ahn,
Bernadette Baum and Bernard Orr)