Brazil is experiencing their worst drought in last 20 years. It is severely affecting their coffee and orange production. Brazil is the largest producer of coffee in the world. Out of the total area under cultivation of coffee, 15% is irrigated which contributes most in the total production. Same is the case of Orange production. Brazil is the largest exporter of Orange Juice. Drought will have cascading effect on the supply chain of these 2 commodities worlds over.
Generally, Brazil receives rains during November to March. So, the earliest next showers can be expected only after 5 months. This year, the farmers, who receive rains till March, had to start pumping out water from their reservoirs from as early as January this year. This has resulted in depletion of the water storage before the onset of the dry period leaving farmers worried over the future of their coffee and Orange plantations.
This drought is also putting pressure on Brazil’s power grid because around 75% of the Brazil's electricity is generated by plants driven by flowing water, one of the largest proportions for any country. To meet the shortage, Brazil is exploring options of generating extra Tharmal power from existing plants and importing power from neighbouring countries Argentina and Uruguay.
Power lines connecting pylons of high-tension electricity are seen near Brasilia, Brazil August 29, 2018. Picture taken August 29, 2018. REUTERS/Ueslei Marcelino
Brazil's coffee and orange output may drop for the second year in a row [File: Victor Moriyama/Bloomberg]