Coffee production in Brazil, the world’s biggest grower, may drop to the lowest in four years in 2011, pushing up prices as trees enter the lower-yielding half of a two-year cycle, Agriculture Minister Wagner Rossi said.

Growers will harvest 37 million bags, down 23 percent from 48.1 million bags estimated for this year, Rossi said in an interview in Brasilia today. Coffee prices will likely rise next year as global demand outpaces supplies amid declining stockpiles, he said.

“Prices will likely remain on a steady rise,” Rossi, 67, said at his office. “World demand is firm and global stockpiles are low.”

Coffee, which has surged 72 percent this year, extended a rally to a 13-year high earlier today on concern adverse weather in Brazil and India will pare global supplies. Arabica coffee for March delivery reached $2.4225, the highest since June 1997. It fell 1.6 percent to $2.3005 per pound at 12:51 p.m. on ICE Futures U.S. in New York.

Output in Brazil, which ships about a third of world exports, usually drops every other year because trees can’t sustain high yields for two straight harvests. Fungus that was found in coffee crops in southeastern Brazil because of excess rains won’t hurt production, Rossi said.

“The coffee blight is a problem but not a threat to output,” Rossi said. “The improvement in farmers’ income will help them fight the fungus by investing more in their crops.”

Commercial farm lending may rise in the crop year that began in July as growers invest more in machinery and increase planted area to benefit from rising commodities prices, Rossi said. Lending grew 29 percent in the past harvesting season to about $49.8 billion, the ministry said.  Bloomberg