Excellent work.  Thanks for the update.

Jeff




Robert Johnston
01/11/2001 12:50 PM
To: Jeffrey A Shankman/HOU/ECT@ECT, Gary Hickerson/HOU/ECT@ECT
cc: Scott Tholan/Corp/Enron@Enron, Rommel Aganon/Corp/Enron@Enron 
Subject: Brazil coffee estimate: latest @35mm

After weeks of media reports and official Brazilian govt forecasts of a 25-27 
million bag crop, we are finally getting to the real likely crop figure of 35 
million bags, which we forecast in mid-November  (see report below the Dow 
story).  I believe that this is the kind of information that can be a real 
winner for the EGM Agricultural traders by clarifying the confusing and 
misleading reports from Brazilian official sources.

RJ
---------------------- Forwarded by Robert Johnston/HOU/ECT on 01/11/2001 
11:28 AM ---------------------------
   
	
	
	From:  Rommel Aganon @ ENRON                           01/11/2001 10:19 AM
	

To: Robert Johnston/HOU/ECT@ECT
cc:  
Subject: Brazil coffee estimate: latest @35mm

Robert, we hit another one on the head.  

-- DJ MARKET TALK: Brazil 01-02 Coffee Crop Seen Near 35M Bags --
 
  Contact us in London on 44-20-7842-9358 or in New York on 201-938-4435. 
 
  1614 GMT (Dow Jones) Brazil 01-02 crop seen in 35 million bag range, says
trader. However, much too early to put a firm figure on it with possibility of
weather, other upsets, he adds. (CHH) 



Confidential
                               Enron North America Competitive Analysis
 & Business Controls

TO:  Gary Hickerson
FROM: Robert Johnston 
CC:  Erin Willis, Elsa Piekielniak, Vince Kaminski, Scott Tholan
RE:  Brazilian Coffee Crop Forecast
DATE:  06 November 2000

1. 2000-2001 Crop

This crop flowered from September 1999 to January 2000 and was harvested from 
April 2000 to November 2000. The peak of the harvest occurred in June/July.  
The 2000-2001 crop is currently being exported, and exports from the crop 
will continue into the first half of 2001.  The consensus from our sources is 
that this crop will be bigger than expected and total 32-33 million bags.  
Brazil,s Ministry of Agriculture (Embrapa) is expected to release an official 
total in the next 10 days, which may or may not be accurate.  The most recent 
government forecast called for 28.9 million bags.  Growers have been issuing 
similarly lower crop yield estimates for 2000-2001 as a way of calling 
attention to a probable bad harvest and pressuring the government to provide 
more generous financing subsidies.

The current dry weather impacts the 2001-2002 crop, not the 2000-2001 crop, 
which is largely harvested.  Crop receipts issued by cooperatives in Brazil 
are 11 percent greater than they were in 1999-2000.   Our top source in 
London believes that the 2000-2001 crop has been largely discounted by the 
market and that the focus should be on 2001-2002.

2. 2001-2002 Crop

This is the crop that should be currently flowering in Brazil, but was 
impacted by the June frost and the October dry weather.  The harvest for the 
2001-2002 crop will run from April 2001 to November 2001 and will be exported 
in the second half of 2001 and in the first half of 2002.  The Brazilian 
government is likely to release its 2001-2002 forecast in December or January 
2001.  The 1999 plantings garnered expectations of a 2001-2002 crop yield of 
44-46 million bags.  However, recent weather problems have caused a 
significant downgrade of this forecast to between 33 and 40 million bags.

Other sources in contact with coffee growers in Brazil report the potential 
for even greater damage to the 2001-2002 crop, in the range of up to a 50 
percent drop, or 22-23 million bags.  Agronomists from Cooxupe, the largest 
coffee cooperative in Brazil, have already pegged their first estimate at 
27.8 million bags.  Again, however, it is critical to remember that growers 
tend to exaggerate weather damage, which is then further exacerbated by 
market rumors.  As evidence, dry weather in the spring (Sept-Dec in Brazil) 
of 1999 caused alarm regarding the 2000-2001 crop.  Even though the dry 
weather did not end until December 1999, there was still time for flowering, 
which caused many market watchers to upgrade their forecasts.

While analysts and growers agree that the highly irregular status of the 
coffee trees makes the 2001/2002 crop one of the most difficult to evaluate, 
the occurrence of average to normal rainfall will greatly sharpen crop 
forecasting efforts.  It is most critical for the rest of November and 
December.  Recent rains since the last week of October have begun to address 
the hydrological deficit in the soil.  Continued, steady, well-dispersed 
rains will help offset losses, but estimated irreversible damage to the 
expected yield of 44-46 million bags from frost and dry weather to date will 
be a minimum of 15 percent, making the new yield forecast no greater than 
38-40 million bags.  A shortage of significant rainfall between now and the 
end of December could bring yield down to a 30 percent loss from the 
forecast, in the range of 33-36 million bags.

Rain is particularly significant because the new planting in recent years has 
been concentrated in the Cerrado (savannah) region of Northern Brazil.  The 
coffee can be mechanically harvested in this region, but requires significant 
irrigation.  The irrigation alone will only partially offset the dry 
weather.  

The frost damage from June 2000 accounts for a 75 percent crop loss in Parana 
and a 20 percent crop loss in Sao Paulo, but these states only account for 20 
percent of total Brazilian production.  In Minas Gerais (almost 60 percent of 
production), the crop losses are only 10 percent.  Crop losses in Espiritu 
Santo, which accounts for 10 percent of production, have been negligible.

Our sources will monitor rainfall and flowering/cherry formation on the 
coffee trees, which must occur by January 2001.  The recent rainfall is 
viewed as promising and supports our basis for a 33 million bag estimate.