Optimism is high among Brazilian coffee and sugar producers.

Take evidence from fertilizer purchasing behaviour.

Nutrient deliveries by Fertilizantes Heringer, one of the country’s top fertilizer distributors, overall fell by 3.6% year on year to 433,000 tonnes in the July-to-September quarter, in the face of high prices.

But volumes sent to cane and coffee plantations bucked the trend.

Coffee plantations held their take steady at 152,000 tonnes, while cane growers hiked their purchases by 48% to 80,000 tonnes, with scrimping focused on producers of the likes of corn, soybeans and vegetables.

‘High expectations’

The ready buying tallies with market assessments of producers’ mood.

In coffee, “farmers have high expectations for the coming season, 2023-24,” Cepea said, noting that “with frequent rains in arabica-producing regions, crops’ development has been positive”.

Indeed, many commentators forecast Brazil’s 2023 arabica output exceeding this year’s. Fitch Solutions, for instance, sees a 4.4m-bag gain to 68.8m bags, despite 2023 being an “off” year in the country’s cycle of alternate higher and lower producing years.

‘Improved a lot’

For cane, rains which picked-up in September have, while hampering the tail end of the 2022-23 harvest in the key Centre South growing district, enhanced crop growth, boding well for the next crushing period, as starts next April.

AdecoAgro, for instance, said that “the situation and the outlook for our sugarcane has improved a lot”, with yields already recovered above 80 tonnes per hectare, the group said, adding that “the situation for next year is also very good”.

“Next year, we are going to be crushing more sugar cane than we were expecting,” said Renato Pereira, director of the group’s sugar, ethanol and energy business.

“Actually, we think that we are going to increase the crushing for next year close to 20%.”

Bigger rival Sao Martinho has forecast growth of 5-10% in its cane volumes in 2023-24, depending on the weather over the next few months.

Price factor

Still, growers’ returns will of course depend on price as well as production – and on that score, the outlook is not so upbeat.

For coffee, arabica prices have already tumbled from their peak, and are poised to stay there if the futures curve is to be believed. (Fitch Solutions and Rabobank do forecast some recovery in 2023.)

Raw sugar futures have behaved better, but are also looking at a decline – which could be more severe than investors believe, if Fitch is anything to go by.

Producers should remember to prepare for the worst, even as they hope for the best, and get some forward hedging in to cover the cost of that expensive fertilizer.

The dip in hedging of the 2022 coffee crop – at 65%, down from 72% last year, according to Safras e Mercado – is not a promising sign.

AdecoAgro looks more sensible in raising to 61,000 tonnes its forward sugar sales for next season, up by 40% on the equivalent pace a year ago.