COMMODITIES-COFFEE: Brazil Initiates Stockpiling Plan

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 16 2000 (IPS) - Brazil announced Thursday that it will withhold coffee from the market beginning next week, acting in line with a decision by coffee-producing countries meant to boost the bean’s international prices.

The programme, unveiled by Agriculture minister Marcus Pratini de Moraes, establishes that, as of Monday, June 13, government- authorised storehouses in the country’s leading coffee-producing areas will receive coffee crops for storage.

Transportation, storage and required insurance costs are to be paid by the owner of the product. To finance these expenses, the government has earmarked 300 million ‘reais’ (166 million dollars) at 9.5 percent annual interest, a comparatively low rate for this country.

Coffee growers hope this outlay will be compensated by rising prices for their crop on the international market – the ultimate goal of the retention measure agreed on May 19 in London by the 14 members of the Association of Coffee-Producing Countries (ACPC), with the backing of many non-affiliated nations.

The accord calls for a 20 percent reduction in coffee exports over the next 24 months.

This retention is to be cancelled once the average international price reaches 95 cents on the dollar per pound of coffee. Exports would be reinitiated when the price surpasses 1.05 dollars per pound.

World coffee prices have fluctuated since the May decision, but without demonstrating a clear tendency towards recovery. Brazil’s coffee growers and exporters hope that the retention plan will now boost the prices.

As the world’s leading coffee producer and exporter, Brazil’s retention quota is three million 60-kilo sacks of coffee per year.

The stockpiled coffee will be released based on the schedule and conditions defined by the ACPC Coordinating Committee, which will also depend on the performance of the world market, explained minister Pratini de Moraes.

The Association’s decision to cut back coffee exports by 20 percent, however, met sharp criticism from many of the industry’s experts and entrepreneurs, who charge the measure will be ineffective.

Coffee is not like petroleum, argues Rubens Nunes, an economist at the University of Sao Paulo. If it becomes more expensive, consumers just replace it with a different beverage, he said.

The policy comes at a bad time for Brazil, because the nation is attempting to boost exports in order to reduce the foreign accounts deficit, pointed out Bruno Angst, spokesman for coffee exporters in Santos, a port city east of Sao Paulo that handles most of the nation’s goods sold overseas.

Coffee growers also question the current low prices, knowing that this year’s harvest is suffering due to the drought that has hit the country’s major coffee producing regions.

Total production this year is to reach just 28.9 million sacks, a far cry from the expected 40 million, according to calculations by the governmental Brazilian Agricultural Research Enterprise.

This volume will not be enough to cover export demands of 17 million sacks, including instant coffee, and internal consumption of 12.5 million.

The measure does have the support, however, of the Deliberative Council on Coffee Policy, which includes delegates from the government and coffee growing, export and industry sectors.

Brazil must comply with the retention plan to maintain its leadership role, stated Manuel Bertone, vice-president of the National Coffee Council, an organisation that represents more than 200,000 Brazilian coffee growers.

Brazil took in 2.23 billion dollars for raw coffee bean exports in 1999, but this year is expected to see a sharp reduction.

Foreign coffee sales totalled 631 million dollars from January to April of this year – a 31.4 percent drop compared to the same period in 1999.

Scarce rain in south-central Brazil has replaced frost as the climatic killer of the nation’s coffee crop. Drought during the first months of this year meant losses of 40 percent for the southern state of Minas Gerais, the country’s top coffee-producing area.

Coffee growers are also worried that Brazil will continue losing ground among the world’s coffee exporters. Currently the nation’s exports represent 22 percent of the world total, while in the 1980s it reached 30 percent, and was even higher in previous decades.

Agreements to intervene in the world market to balance supply and demand, established prior to 1989 by the International Coffee Organisation, were responsible for Brazil’s backsliding in the coffee sector, say critics.

In the 1960s and 1970s, coffee production saw explosive growth in Asia, Central America and Africa, ultimately leading to an excessive supply internationally, according to Brazilian coffee’s nationalist defenders.