COMMODITIES-BRAZIL: Coffee Exports Still High

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Feb 11 1999 (IPS) - Brazil exported around 1.4 million 60-kg sacks of coffee beans in January, a record high for the first month of the year.

Revenues stood at 175 million dollars, the highest level seen in 10 years, according to the Brazilian Association of Coffee Exporters (ABECAFE), which estimated sales at 1.425 million sacks at an average price of 123 dollars per sack.

In January 1998 the price stood 65 percent higher, at 203.25 dollars per sack. But only 790,001 sacks were exported, because the coffee available for export was scarce due to three years of low yields caused by the frosts of 1994.

ABECAFE projects a new rise this month, to 1.7 million exported sacks. That amount could be even higher, but February has only 28 days, and many activities in the country are interrupted for at least four days due to Carnival.

Part of the two million sacks which were to be shipped this month will not go out until March, say exporters.

Brazil’s coffee sector benefited from last year’s strong harvest of 35 million sacks, the devastation wrought in much of Central America by Hurricane Mitch in late October, the earthquake that recently shook Colombia and, since last month, the devaluation of the local currency, the real.

The troubles of its competitors kept the high yield in Brazil – the world’s largest coffee producer – from driving down international prices, which last year peaked at 212.63 dollars per sack in February and bottomed out at 113.94 dollars in October, according to the Brazilian Federation of Exporters (FEBEC).

Prices have rallied slightly since November, but that tendency should be checked by the crash of the real. Importers will press for discounts on their purchases of Brazilian coffee.

Exporters have been the big winners of the devaluation of the local currency, buying coffee in reals and selling it in dollars. But both importers and coffee farmers are disputing a share of the profits.

Farmers raised their prices, and are holding on to their coffee, selling only what is absolutely necessary to cover their immediate needs.

They expect prices to rebound in the next few months, as Colombia’s yield will be low due to the earthquake, and Brazil’s harvest should also be lower this year – 23 million sacks.

Another threat is that the government could also demand its share of the windfall profits by taxing exports, in an effort to curb the rise in domestic prices of agricultural commodities like coffee and soy.

The proposal of a tax on exports brought an outcry from farmers associations. ABECAFE and FEBEC joined together to protest the measure. They demanded, instead, that the government start to free up its stockpiles, which they estimated at nine million sacks.

The government has begun to sell off part of the coffee it has been stockpiling for years. But according to exporters and the roasting and instant coffee industries, it should sell off even more, in order to help regain markets that Brazil has lost over the past few years.

Economic authorities deny that a tax on exports will soon be put into effect. But they admit that the tax on the circulation of goods, charged in a variety of forms by provincial governments, is to be renewed.

Exports have been exempt from that tax in the past few years, in response to demands by export companies which suffered from an overvalued real.

But provincial governments want to recover lost revenues, due to their serious financial troubles, and the efforts demanded of them to balance their accounts, as part of the fiscal adjustment that the central government agreed with the International Monetary Fund (IMF).