Coffee Production in Brazil From 2004 to 2016

Introduction

The Brazilian agribusiness continues to grow, with coffee being one of the most profitable crops in the country. Despite economic and geopolitical developments, Brazil remains a leader in coffee production partly due to its attractive geographic position as well as a variety of kinds of coffee produced. Since the beginning of the 21^st century, the dynamics of coffee production have changed in the region because of decreased instances of government interventions and price shifts on the market. The purpose of this paper is to examine Brazilian coffee production from 2004 to 2016 to determine the exact structural changes that led to the optimization and improvement of the sector.

Global Coffee Trade

Nowadays, coffee is considered a somewhat essential product, which is why its international trade remains extremely profitable. As one of the crucial agricultural materials of the 21^st century, coffee generates exceptionally high demand among consumers worldwide. From 1995 to 2015, there has been an increasing trend of global production of coffee mainly due to the continuously growing number of coffee-drinkers in developing countries (Torok et al.).

In addition, during this period, “total coffee production has increased by almost 65% globally from 87 million 60 kg bags to 143 million bags” (Torok et al. 2). This increase was caused by the growth of coffee production in the leading countries such as Brazil, Ethiopia, and Colombia. Additionally, the emergence of Vietnam as a coffee producer at the end of the 20^th century contributed to the aforementioned trend.

The disappearance of Mexico, El Salvador, and Côte d’Ivoire from the global arena of coffee distribution has not affected the industry’s growth significantly. Brazil still holds the overall leading position, with Vietnam and Colombia not far behind. The concentration of the crucial coffee producers has increased along with the overall growth observed in the production sector (Torok et al.). Table 1 demonstrates that the share of the producers in the top three (Brazil, Vietnam, and Cambodia) has been close to 50%, and the top 10 producers’ share has increased to almost 90% from 2004 to 2015. Thus, it is evident that there is not a lot of competition in the industry, with the three most profitable producers dominating the market.

Despite the aforementioned growth of the global coffee production, there have been many inconsistencies in the industry’s rise. Two reasons behind this phenomenon were unfavorable weather conditions associated primarily with natural disasters and climate change, as well as various diseases that affected coffee shrubs. Moreover, the continuous growth of coffee production required consistent increases in the number of consumers, particularly new ones in developing countries.

Brazil is not only the world leader in coffee production, but the largest exporter of coffee globally. According to Volsi et al., the numbers continue to increase since “approximately 50.3 million sixty-kilogram bags of coffee were collected in Brazil during the 2016 harvest, with 42.5 million of these bags containing arabica coffee and 7.8 million containing conilon (robusta) coffee” (1). The revenue generated from such large sums of coffee being produced and distributed was close to US $5 billion in 2016 alone (Volsi et al.). The most lucrative destinations for export were a variety of EU countries, including Germany and Italy, as well as Japan and the US.

Despite such impressive profits, it is important to acknowledge the history behind coffee production in Brazil and examine current trends to make predictions about potential increases or reductions in the industry’s profitability in the region. The cultivation of coffee in Brazil started in Pará–in in the 1700s (Volsi et al.). In the following decades, it migrated from the Northern region to Rio de Janeiro and São Paulo. In the 20th century, “coffee cultivation continued its expansion into the states of São Paulo and southern Minas Gerais, Espírito Santo, Paraná, and even into Brazil’s northern region, in the state of Rondônia” (Volsi et al. 2).

Until the mid-2000s, the coffee market has essentially been under the control of the Brazilian federal government. The biggest shift that happened around 2004-2005 has been the shift towards more lenient production standards and export regulations.

Improvements Since 2004

2003 and 2004 have been transformative for Brazilian coffee production. First, the industry had to adapt to the lack of federal government’s interventions. Second, the sector went through reinvention because of the development of internal management frameworks within each company. Thus, the market adapted as firms incorporated innovative farming and production mechanisms to increase competitiveness no longer regulated by state authorities. As of 2016, coffee producers in Brazil invest in differentiating their products in terms of overall quality and production costs to increase their profitability (Volsi et al.).

Moreover, since 2004, Brazilian coffee production has migrated to more attractive regions for cultivation. Additionally, in the 2010s, producers committed to inserting themselves “specific consumer markets and to increase the value-added of their product by producing specialty coffees with seals of quality and geographical certifications” (Volsi et al. 2). The sector has changed significantly to remain competitive and generate more profits.

Another reason for the aforementioned innovations in business practices and production techniques employed by Brazilian coffee exporters has been droughts happening in 2003 and 2004. Unfavorable weather conditions dictated the available water supply, which drastically affected production. It is predicted to decrease to around 28,000 million bags in 2003/2004 due largely to unfavorable climatic conditions, particularly limited water supply. Not only in Brazil but also in several coffee-growing countries, drought is considered the major environmental stress affecting coffee production (DaMatta).

The physiology of plant responses to drought stress is rather complex, showing different modifications following soil drying. The dynamics of soil water depletion, the changes in water demand from the atmosphere, as well as phenological state in which water deficit is developed, are sources of the wide variation in plant responses to drought. Furthermore, particularly in the tropics, drought episodes are remarkably aggravated by both high solar radiation and temperature, so drought should be accounted for as multidimensional stress (DaMatta). Thus, due to the new government policies and droughts, Brazilian coffee exporters did not only have to but were enabled to innovate the industry and improve the quality of their produce.

The Impacts of Climate Change on Coffee Production

On the one hand, Brazilian coffee production has experienced much improvement in both quality and quantity. Nab and Maslin note that it has experienced a 60% increase over the last decade. Moreover, in the 2017-2018 season, “Brazil produced over 3 million metric tons of coffee (51 million bags), of which 60% was exported” (Nab and Maslin 3). On the other hand, climate change has quickly become one of the primary areas of concern for coffee producers in Brazil.

First, the amount of climatically low-risk areas in the country continues to decrease significantly, according to Koh et al. By 2050, researchers predict that the proportion of such landmasses in the state of São Paulo might be reduced by approximately 20% in the conditions relative to current climate transformations (Koh et al.). The lack of complete absence of adaptability to climate shifts results in Brazilian coffee exporters deciding to abandon the production.

Brazilian Coffee Production in the Context of Sustainability

Due to the aforementioned concerns regarding climate change its effects on coffee production, Brazilian companies have invested in a variety of sustainability initiatives. The country’s agricultural sector has incorporated the use of certification to prove to partners and consumers that “producers conform to good agricultural practices, practice safe pesticide use, engage in resource protection or protect the environment” (Nab and Maslin 4). In reality, these techniques are often utilized as an effective marketing instrument to stand out from the competition and respond to consumers’ scrutiny. Products, which are labeled “environmentally friendly,” attract a new generation of customers who value businesses that prioritize ethics. Since the 2000s, Brazilian coffee exporters have adopted a voluntary sustainability standard (VSS).

Although monitoring VSS compliance has its limitations, such sustainability measures have slowly started to dominate Brazilian coffee production. They provide the industry “address landscape conservation, better agricultural practices and reduced production costs to result in adding value for farmers and consumers” (Piao et al. 4). Certified coffee calls for higher prices, which benefits coffee producers in Brazil.

Conclusion

In conclusion, Brazilian coffee production has undergone various changes since 2004. Largely due to government reforms and global changes in climate, coffee exporters have adopted numerous innovative initiatives to attract new consumers, demonstrate the commitment to sustainability, or optimize the allocation of resources needed for the production of coffee beans, including landmasses, water, as well as the newest technology. From 2004 until 2016, these have been the primary developments in Brazilian coffee production.

Works Cited

DaMatta, Fabio Murilo. “Exploring Drought Tolerance in Coffee: A Physiological Approach with Some Insights for Plant Breeding.” Brazilian Journal of Plant Physiology, vol. 16, no. 1, 2004, pp. 1-6. Web.

Koh, Ilyun, et al. “Climate Risks to Brazilian Coffee Production.” Environmental Research Letters, vol. 15, 2020, pp. 1-12. Web.

Nab, Carmen, and Mark Maslin. “Life Cycle Assessment Synthesis of the Carbon Footprint of Arabica Coffee: Case study of Brazil and Vietnam Conventional and Sustainable Coffee Production and Export to the United Kingdom.” Geo: Geography and Environment, 2020, pp. 1-19. Web.

Piao, Roberta Sauza, et al. “The Adoption of Voluntary Sustainability Standards (VSS) and Value Chain Upgrading in the Brazilian Coffee Production Context.” Journal of Rural Studies, 2019. Web.

Torok, Aron, et al. “The Competitiveness of Global Coffee Trade.” International Journal of Economics and Financial Issues, vol. 8, no. 5, 2018, pp. 1-6. ProQuest. Web.

Volsi, Bruno., et al. “The Dynamics of Coffee Production in Brazil.” PLoS ONE, vol. 14, no. 7, 2019, pp. 1-15. Web.