Record Brazil coffee crop cuts costs for Starbucks: commodities

Marvin G. Perez, Patricia Laya – Bloomberg Businessweek, 12/04/2012

Record coffee harvests in Brazil, the biggest grower, are compounding a global glut of arabica used by Starbucks Corp. (SBUX) and Dunkin’ Donuts Inc.

Brazilian farmers will reap 50.8 million bags in 2013, a record for a so-called low-crop season, according to the median of nine analyst estimates compiled by Bloomberg. The harvest reached 55.9 million 60-kilogram (132-pound) bags in 2012, an all-time high for a peak year. Output usually drops in alternate years because of growing cycles. Prices may fall 14 percent to $1.311 a pound by June 30, the average of 14 predictions shows.

Futures slumped about 50 percent since May 2011, as the highest prices in 14 years spurred Brazilian farmers to boost supply. Their exports jumped 54 percent to $8.7 billion in 2011. The flood of beans has continued and stockpiles tracked by the ICE Futures U.S. exchange are headed for the biggest annual gain in more than a decade. Rising costs and concern that economies are slowing encouraged roasters and consumers to favor cheaper robusta beans.

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