Hailstorm Smacks Brazil Coffee

A massive #hailstorm happened across the #Brazilian #coffee growing regions this Tuesday, and more is possible today. Many cities were affected, and the case gained attention, with speculation on potential impact, since the event was much wider than normal. According to Procafé, this "may have been the largest hailstorm that the industry has ever faced in all its history."

Hailstorms tend to be localized, in general: a disaster to the affected #producers, but not to the region as a whole.

However, that wasn't the case this week. Not only did these storms affect different cities, but they were also high intensity, with large hailstones, which generally have the potential to damage not only coffee plants, but also other crops.

Our initial estimations are that the crop was impacted materially by this weather event, and we estimate between 0.1 and 2.7 million bags lost, with a “middle ground” of 1.3 mm bags. This is a wide range, but it reflects the difficulty in making estimations this early in the crop development.

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With that in mind, we investigated the extent of the recent hailstorm in #Brazil to anticipate potential damages. I emphasize that at this stage in the crop cycle, with only "chumbinhos" in the plants, it is quite difficult to make evaluations, but we can have an idea of some potential impacts, making an assessment in terms of affected area, and its average historical production.

Here is our methodology:

First, we mapped the cities and affected areas. We found that this atypical event was spread from the South to the Northwest of Minas Gerais. Although it came close to Alta Mogiana and Cerrado, these important producing areas were spared of the misfortune.

The list of affected cities is extensive, but for the purposes of this study we considered only those with 100% confirmation. The location of these different cities allowed us to estimate the total affected area and compare it with the coffee growing regions to find an intersection.

We used Conab's production data for the growing regions affected. To estimate the affected areas inside these regions (and therefore their productions), we've experimented with different percentages based on what we found to be the possible extent of the hailstorms, using the mapping we did as a reference.

Therefore, we divided the impacts into 3 potential scenarios: optimistic (1%-3% area affected), neutral (10%-20%) and pessimistic (15%-40%). With this data in hand, we were able to estimate an average volume that's produced by these affected areas in the 3 cases mentioned.

The final step was to estimate the percentage loss of this production. We attributed a loss of 20%, 30% and 40% to the optimistic, neutral and pessimistic scenarios, respectively. The average result, which I still consider somewhat pessimistic and inaccurate, was a loss of ~1.3m bags. In a more optimistic scenario, the loss would be of "only" 100k to 200k bags.

INMET's alert map indicates hailstorm possibility for today, so these numbers could actually increase if that becomes a reality. They issued a degree 1 alert (highest is 3 - lowest is 1) for storms, including potential for hailstorm in an area extension that includes Cerrado, Southern MG and Alta Mogiana.

We will keep watching and bring our view on the matter, if the need arises.

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All considered, our estimate for Brazil in 2023 is not a record crop, as in 2020, but still one of a relatively high volume. Likely to help produce a healthy global surplus that will hold despite this event. Brazil's wet season has "done its job" so far, and the short and long-term projections are of spread and regular rains across cherry growth.