Coffee was fifth among the agricultural products most exported by Brazil in 2006. Of the 44 million bags of coffee produced, 27.2 million were exported, generating revenues of US$ 3.3 billion. The product accounts for 2.5% of the country’s export basket, but it used to amount to 70% in the 1920s. Presently, in addition to selling to traditional markets such as Germany, the United States, Italy and France, Brazil has conquered new markets, such as Japan and China.

Cláudia Abreu, Débora Rubin e Geovana Pagel*

São Paulo - In 2006, Brazil consolidated its position as the world’s largest producer and exporter of coffee, a product that once again contributed to the country’s agribusiness Gross Domestic Product (GDP), which was R$ 534.8 billion (US$ 250.8 billion at current exchange rates). According to data provided by the National Confederation of Agriculture and Livestock (CNA), the gross value of coffee production last year was R$ 10.4 billion (US$ 4.8 billion) - 1.9% more than recorded in 2005, when revenues amounted to R$ 10.2 billion (US$ 4.7 billion).

Last year, coffee was fifth among the agricultural product most exported by Brazil. Of a total 44 million bags of coffee produced, 27.2 million were exported, generating revenues of US$ 3.3 billion. “It was the sector’s highest exchange revenue in recent years. Coffee accounted for 8% of gross revenues obtained with agribusiness exports,” said Guilherme Braga Abreu Pires Filho, general director at the Brazilian Coffee Exporter Council (CeCafé).

Presently, coffee represents 2.5% of the total Brazilian export basket. But the commodity once amounted to 70% of the country’s foreign sales, during the 1920s. Brazilian coffee exports began in 1816. Between 1830 and 1840, coffee led exports from the country, answering to more than 40% of total exports. In 1840, Brazil became the world’s largest coffee producer.

“The golden age of coffee lasted until 1930, when the commodity represented, on average, 65% of Brazilian exports,” says Maurício Miarelli, president of the National Coffee Council (CNC). In 1932, there was a stock sell-out, due to a worldwide super-crop.

The share of coffee in the country’s exports decreased during the 1970s, when the value of manufactured goods exports surpassed that of coffee. During the 1980s, coffee answered to approximately 10% of total exports. In the 1990s, with greater diversification of the export basket, that percentage decreased even further, with coffee amounting to approximately 3% of Brazilian exports.

Added value

The main market segment for coffee in Brazil is still the export of green grains. But the country already has a reputation in the soluble coffee market (read story below), and has recently begun entering the roasted-and-ground coffee market. The country has exported the variety for only four years now, and it yielded US$ 26 million in 2006.

“That is not much if compared with grain sales, but it is a lot if we consider that we got started a little while ago. On the other hand, roasted and ground coffee has added value. We can charge up to US$ 4.5 per kilogram, whereas grains are sold for US$ 1.7 per kilogram,” says Nathan Herszkowicz, executive director at the Brazilian Coffee Industry Association (ABIC).

Roberto Rodrigues, former minister of Agriculture and currently the manager of the Agribusiness Center at Getúlio Vargas Foundation (FGV), a renowned Brazilian university, also claims that the scenario has improved a lot over the last few years, but he gives a warning. According to Rodrigues, should Brazil intend to remain the world’s largest coffee producer and to cater to the global demand, it will have to invest in three basic aspects: reducing producer debts, increasing sales of roasted and ground coffee and allowing producers, via cooperatives, to deal directly with buyers and, preferably, to process their own coffee.

“The most important thing, though, is to invest in roasted and ground coffee, because Brazilian coffee needs more added value. As long as such investment is not made, Germany and Italy will continue exporting coffee without planting a single grain - which is simply unacceptable,” says Rodrigues.

Coffee instead of tea

From the 1950s onwards, Brazil began facing competition from other coffee producers, which drove Brazilian participation down to an average 25% of worldwide production. Currently, Brazil accounts for 30% of the global production. In order to maintain its share in the global market, in addition to selling coffee to traditional markets such as Germany, the United States, Italy and France, Brazil entered new markets, such as Japan and China, which are not, or were not, traditionally large consumers of the product. Japan is already the world’s fifth largest consumer.

“These are countries with similar features, which led to an increase in coffee consumption. One such feature is the Westernization of habits,” claims Guilherme Braga of Cecafé. “What we see in China, for instance, is that the bulk of coffee consumption does not take place at home, different from most other countries, in which 60% of coffee is habitually consumed at home,” he explains.

“The Japanese and Chinese youths want to be different from the elderly, who drink tea. They like to go to ‘coffee houses,’ where they can talk, socialize. At the tea houses, people must remain silent,” Nathan explains.

According to the director general at Cecafé, one of the strategies used consists of entering the Chinese market via cafés, apparently the market segment that will develop the most. But there is also the possibility of establishing partnerships with local milling industries.

In Arab countries

The Arab countries are regarded as potential new markets. Twelve of the 22 countries in the League of Arab States already import Brazilian coffee. In 2006, these countries imported 811,600 bags of coffee, mostly of the Arabica type. Also last year, Lebanon became the largest market for coffee in the Middle East. The Lebanese imported 292,400 bags of coffee, surpassing Syria, which imported 250,700 bags in 2006 and used to be the largest Arab importer of Brazilian coffee.

Despite the fact that exports to the Arabs are still low, percentage-wise, Braga says the region is a good market. According to him, the Arabs consume even more Brazilian coffee than the figures show. That is because many sales are not made directly from Brazil, but rather through intermediaries in Europe.

Challenges

Despite the increase in coffee exports, Brazil and other producers worldwide must be careful when it comes to taking advantage of increased demand, so as not to repeat previous episodes. One precaution is to avoid getting carried away when prices are high. “Between 1994 and 1998 there was an extraordinary cycle of foreign prices, something like US$ 250 to US$ 300 per bag, which drove production sky-high, especially here in Brazil. Then there came a cycle of low prices, and now we are entering a cycle of even higher prices,” says Guilherme Braga, of the Cecafé.

It is very difficult to organize this process, because coffee has various degrees of importance to each economy. Brazil, for instance, once relied almost entirely on coffee. Nowadays, other countries are highly dependant on it, either for capital revenue or job generation. Vietnam is one such country. In 25 years, it became the world’s second largest producer, and should grow even further.

According to Braga, one alternative is to seek support from the International Coffee Organization (ICO), comprised of 72 countries, including producers and consumers. “Presently, the ICO does not carry out market actions as it used to in the past, but it is a forum for debate that seeks to harmonize policies, in order to prevent imbalances between production and consumption from happening, as was common in the past,” he says.

Another effort is the promotion of Brazilian coffee abroad. The Coffee Policy Deliberative Council (CDPC) sets apart some of funding from Funcafé (a special fund for coffee policies) for marketing. Actions such as tastings at points of sale and at sector trade shows are increasingly common - especially in the special coffee segment. “We have participated in trade shows for the segment, mostly in France, Russia, Japan and the United States,” says Braga.

*Translated by Gabriel Pomerancblum

Source: anba.com.br