Brazil's coffee frost risk highest since 2000

From droughts to floods to hurricanes, commodity traders have been roiled by a record dose of almost every variety of inclement weather under the sun, save one - a coffee-curdling frost in Brazil. But this year, just as global stocks of coffee beans dwindle to their lowest since records began, Brazil's number may be up.
With the global weather anomalies known as La Nina and El Nino in momentary balance, experts say the risk of frost in Brazil's main coffee region is at its highest since 2000, the last time a sharp blast of cold air from the Antarctic swept across Argentina and inflicted serious damage to some farms.
To be sure, there are reasons not to fear the worst. Warmer oceans and a hotter sun cycle have reduced the odds; and coffee plantations are not as greatly at risk as they were 35 years ago, with most growers having long abandoned the frost-prone Parana region further south, hit hard by frost in the 1970s.
But even a small risk of such a frost in the next three months could have an unusually big impact on the market, in large part because so few traders expect anything like a repeat of the 1975 chill that crippled output the next year. "The big surprise will be if we receive a legitimate frost forecast. I think we'd have a dramatic premium added in because I think most people believe it will never happen again," said Shawn Hackett, president of Hackett Financial Advisors Inc in Florida, specialising in agricultural commodities. The first warning came on Monday, when temperatures were forecast to fall within two degrees of freezing in Minas Gerais's hilly Pocos de Caldas area. Adequate humidity helped spare the region, but worse may be in store.
Cassia Beu, meteorologist at local forecaster Somar, said a number of weather patterns indicated this year had the highest frost risk since the last one in 2000, notably the neutral El Nino Southern Oscillation (ENSO). "It makes it easier for cold masses of air to enter," inland from the coast, she said. That will make for a nervy three months of trading until the risk subsides by late August when the Southern Hemisphere winter nears its end. With stocks low, Brazil's harvest will be more critical than ever for preventing a renewed spike in global coffee prices that have more than doubled in a year.
Higher frost risks couldn't come at a worse time for importers and roasters such as Kraft Foods Inc and Nestle, with prices cooling off from a 34-year high. New York coffee futures jumped 3.7 percent on Friday to close at $2.7095 per lb, their biggest daily gain since April 5. Traders cited jitters over frost risk, compounded by the triggering of chart-based buying and spillover support as other markets moved higher.
A frost would be a blow the market can ill afford. The International Coffee Organisation, ICO, says 2010/11 season global production was around 1 million bags below consumption in 2010, a shortfall made up for by running down stocks.
Coffee frosts are rare but have a knack of recurring after absences long enough to suggest they've gone for good. Current weather trends have caught forecasters' attention. "I think there's high potential. There's a period at the end of July and early August that could bring some threatening cold into the region but it's not a sure thing," said Drew Lerner of US-based World Weather Inc. Meteorologists said a quasi-biennial oscillation (QBO), when polar air masses are pushed along faster by the jet stream current, could blast cold air toward the coffee areas if that ever-changing air current pointed north-east.