UPDATE 2-Brazil cuts estimate for coffee production in 2017

(Adds comments from Conab official, coffee broker)

SAO PAULO, Sept 21 (Reuters) - Brazil’s government on Thursday cut its projections for coffee output this year, especially for arabica, due to unfavorable weather and an insect infestation in the world’s largest exporter.

According to a report by the country’s agricultural statistics agency Conab, total coffee production in 2017 is now seen at 44.77 million 60-kg bags, compared to 45.6 million bags in May. Last year, total output was 51.37 million bags.

Conab reduced its estimate for production of mild-tasting arabica coffee to 34.06 million bags from 35.4 million bags in its May estimate. The country was already expected to produce less arabica because the fields are in an ‘off year’ in the biennial production cycle. It produced 43.38 million bags of arabica in 2016.

The projection for robusta, widely used for instant coffee, stood at 10.7 million bags versus 10.1 million bags in May, showing a sharp recovery from last year’s drought-hit crop of only 7.98 million bags.

Aroldo Antônio de Oliveira Neto, Conab’s head for crop projections, said the main factors behind the revision were climate problems, with below-average rains in some areas in Minas Gerais state, and infestation by insects such as the berry borer beetle.

“There was in increase on attacks by the berry borer beetle. A lot of beans showed formation defects due to that,” Oliveira told Reuters.

Coffee growers in parts of Brazil have been grappling with the worst beetle infestation in recent memory as a ban on a pesticide used for 40 years has helped the destructive insect flourish, threatening bean quality and yields.

Thiago Cazarini, a coffee broker at Cazarini Trading Company, said the market was working with a range between 48 and 52 million bags for the current crop before these problems.

“I guess it is normal to see a revision downwards, under current conditions,” he said.

The agency has yet to release an estimate for next year’s crop, something it plans to do only in December or early next year after evaluating flowering, a key phase to determine the development potential of coffee trees.

Farmers and cooperatives in Brazil have said that prospects for a very large crop next year, when the country will be in the ‘on year’ of the arabica production cycle, have been hampered by a harsh dry spell that left many farms without a drop of rain for more than a month.

Current forecasts indicate an end to the drought, with top producing coffee region of South Minas Gerais expected to receive around 64 millimeters of rain through Oct. 3. (here)

But it is unclear if the coming rains would be enough to revive trees. (Additional reporting by José Roberto Gomes; Editing by Bernadette Baum and Alistair Bell)