Performance of Coffee Industry in Brazil

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  • Topic: Coffee, Brazil, Coffea arabica
  • Pages : 10 (3553 words )
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  • Published : May 5, 2013
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PERFORMANCE OF COFFEE INDUSTRY IN BRAZIL

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Performance of Coffee Industry in Brazil
Introduction
Brazil is the world’s largest coffee producer. It produces approximately twenty five percent [25%] of the world’s total supply of the commodity. It has dominated this position for the last over hundred and fifty years [150]. Eighty percent [80%] of the coffee from Brazil is the Arabica coffee with the remaining percentage being the Robusta type. The Brazilian climate is very ideal for coffee growing with favorable soil type that supports coffee growing. Approximately twenty seven thousand kilometer squares of the country are under coffee plantations with approximately six billion coffee stems all over the nation. Due to suitable landscapes, climate and rich soils the states of Sao Paulo, minas, gerais and parana are the country’s leading producer of coffee. Coffee industry involves some three point five million people in the country mostly in the rural areas. Coffee industry on average provides gainful employment to over seven million people across the country either directly or indirectly. In order to understand the performance of the coffee industry in Brazil in the recent past it is important that we seek to understand and familiarize ourselves with the past trends in production consumption as well as export of the Brazilian coffee in both the domestic and its international market. This provides a suitable basis for our comparison. A number of events trends and happenings have occurred in Brazil in the past that has greatly shaped the Brazilian coffee industry and defined its place in the world market, (Daviron, 2005). In 1880s there was what was popularly known as the coffee cycle in Brazil. Prior to this period the slaves provided free labour in coffee estates as well as in other crops estates. However there grew calls for the free voluntary labour and this attracted many immigrants to coffee plantations in brazil especially in regions of Sao Paulo occasioning it to be one of the major coffee producer in brazil as well as becoming a major industrial town in brazil and the entire region, a momentum that it has maintained up to date. There was also what came to be known as the valorization effect that occurred in the 1900s.Owing to massive production of coffee by Brazil in the world market, in accordance to the law of supply, the price of the commodity fell tremendously in the global market. This occasioned huge losses to the Brazilian farmers. This made the government to intervene in order to boost the welfare of the majority small scale farmers. The government did this by fixing the price of its currency relative to those of major currencies like dollars in order to shield farmers from adverse exchange rate movements that ate into their earnings. The government would also buy the commodity from the farmers and store it and sell it when prices are favorable in the world market. The current fall in global market share of the Brazilian coffee stems from the 1950s. Prior to this era brazil supplied over 80% of the total quantity of coffee consumed in the global market however, after this period its substantial world market dropped significantly due to entry of other large producers of the commodity into the world market nevertheless it remains the largest coffee exporter in the world though at a relatively reduced quantities compared to the amount it was producing prior to that period. Coffee production in Brazil today is marked by the cyclical fluctuations in production. High and low yields alternate on biannual style. The negative effects of the much talked about global warming seems to pose a serious threat to the Brazilian coffee industry. This is because there has been persistent dry climate which is unfavorable for coffee production. This adverse weather phenomenon has led in the area under coffee in brazil.by the end of...
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