The timing of Brazil’s “on, off” arabica coffee cycle may be more important than it looks.

Conab, Brazil’s official crop bureau, has suggested that the cycle, which brings the country alternate higher and lower arabica production years, could be about to reverse, given 2022’s relatively meagre pickings.

If it does, that could jar on prices, as well as on the neatness of output graphs.

Flattened wave

It is easy to see why the bureau is looking out for a switch.

While 2022 is meant to be an on year, Brazil’s newly-finished arabica harvest is estimated by the bureau at 32.4m bags – only 3.1% higher than output in the “off” year of 2021.

The previous 10 on-year crops have, on average, produced year-on-year uplifts of 35%.

The disappointing 2022 performance is a reflection of frost damage to trees which – in curtailing their production this year, and so limiting stress and resource use – could inspire a yield burst for 2023.

History lesson

There is evidence for such fillips, as in 2002.

That harvest, which followed on from a frost-shrunken 2001 crop, soared by nearly 70% year on year to 38.0m bags, on Conab data – setting a record which stood for a further decade.

So it is certainly not impossible that 2023 proves a bumper harvest.

… and one which causes sufficient tree stress to herald a smaller crop in 2024, and reverse Brazil’s arabica production cycle, so turning the calendar’s odd years into “on” ones.

Price impact?

So what?

In many ways, the cycle’s reversal wouldn’t matter. It would still mean the world dealing with bigger arabica harvests every other year from its top producing country.

But there is one way it might.

There are some signs that arabica pricing is influenced by the cycle – and not in the way that might be expected, in that prices have tended to average higher in big production years than in the preceding off ones.

That has held true for eight of the latest 10 on years, including 2022.

Ups and downs

That could well, over such a small sample, be down to chance.

But if it isn’t – and reflects instead, say, investors looking forward, as futures markets tend to do, to a smaller “off” crop the following year – that could matter. For example for growers in other countries with their own arabica cycles.

Uganda, for instance, is also in an on year for its arabica growers, who have been enjoying both high production and elevated prices (which have averaged 227 cents a pound in New York, up by 34% from the full-year 2021 mean, according to Macrotrends).

Should Brazil’s cycle reverse, Uganda’s arabica growers could find their on-year harvests coinciding with spells of below-average prices, so reducing their long-term returns.

Production share

Of course, it is difficult to prove an impact of Brazil’s on-off cycle on world prices over a short time spell.

In the late 1970s and 1980s, after all, a clear on-off arabica production cycle showed little correlation with rises or falls annual prices.

However, Brazil at that time did not have such a stranglehold on world arabica output, being responsible for about one-third of world output, on US Department of Agriculture data.

Now, thanks to factors such as mechanised harvesting limiting production costs, that figure is about 44%, implying a bigger market influence.

That could swell further still if 2023 indeed brings the country a huge harvest.