COMMODITIES-BRAZIL: Coffee Yield to Fall 25 Percent This Year

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Feb 26 1999 (IPS) - Brazil’s coffee harvest should total 26.6 million 60-kg sacks this year, 25 percent down from last year’s yield, according to an estimate by the Brazilian Association of Coffee Exporters (Abecafe).

That fall is basically due to the two-year cycle of coffee trees, whose productivity drops the year after a bumper crop, like the one that began to be harvested last July, said Abecafe.

The 35.3 million sacks obtained at that time allowed the country to expand its share of the international market from 21 percent in 1997 to 23 percent last year, when it exported 16.6 million sacks of coffee beans for 2.328 billion dollars.

The 1999-2000 yield, however, will fall short of meeting the total demand projected to stand at 32 to 34 million sacks from July this year to June next year, including 13 million sacks for domestic consumption as well as exports of beans and instant coffee, said Jorge Steve, president of Abecafe.

Exporters and coffee companies have thus been lobbying the government to sell off more of its stocks, estimated at nine million sacks. But growers are opposed to that proposal, because it would reduce their profits.

Each sector has its sights set on capitalising on the present situation, which is favourable to coffee from Brazil, the world’s leading producer.

The current boom in production has driven down international prices only slightly, because the destruction caused by Hurricane Mitch in Central America and other troubles in Asia and Africa have diminished the offer of Brazil’s competitors.

An earthquake that devastated parts of Colombia early this year hurt exports from that country, the world’s second biggest producer and exporter of coffee.

The crash of the Brazilian real, the local currency, since new exchange rate measures taken on Jan 13, has bolstered the competitiveness of Brazilian coffee, although it pushed international prices down further.

Due to the fall of the real against the dollar, the price of coffee sold on the domestic market rose 29 percent in the past 30 days, which boosted the revenues of growers and industrialists in the sector.

The dollars obtained from exports buy more reals, and coffee- growers are attempting to keep the difference for themselves by raising prices.

With a tax on exports, the government could corner part of those profits, while keeping prices on the domestic market from rising even higher, and thus combating the inflation which has returned with a bang due to the depreciation of the real.

But in the face of heavy resistance from the private sector, the government decided not to implement the tax. The windfall profits for Brazil’s coffee-growers should lead to investment in the sector and thus fuel increases in production over the next few years.