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Special report from Brazil.

New help for Brazilian farmers

The governments economic package to the agricultural sector announced last October at spring planting time was also blessed with favorable weather and as harvesting of the grain crops began in March the Minister of Agriculture calculated and estimated record 91/92 grains crop of 69.5 million tons (soya, corn wheat, beans, rice etc.). This has made Brazil virtually free from importing basic commodities which in the past drew down precious exchange reserves.

The success of the program stimulated a new agriculture package for the winter planting season which was announced March 13th with the following main items:

* The equivalent of US$850 million in new credits to growers with interest at lower than going market rates.

* Negotiation of extension of present loans.

* Reduction of import duties on machinery for the modernization of agricultural equipment.

* Financing of agricultural machinery.

* Investments in warehousing and transport to improve the storage and efficiency in handling of crops.

* Financing of seeds and fertilizers.

* Investments in soil research and improvements.

* Reduction in taxes on the commercialization of basic commodities.

* Compensation of price differences between government minimum prices and market prices.

* Creation of commodity funds to capture some of the capital invested in stock markets.

The package did not specifically mention any benefits for the coffee sector. The coffee cooperatives and rural societies have been agitating for some time for the release of funds and credit extensions, and it is believed that measures will be taken by the Ministry of Agriculture to be timed with the beginning of coffee harvesting in May/June.

Brazil's changing position on the ICA

Brazils official position with reference to the International Coffee Agreement has taken a move towards a positive participation in discussions for a renewal of the ICA with economic clauses. Up until recently, the Growers Societies and Coffee Cooperatives were about evenly divided in their positions for and against a renewal of the Agreement with export quotas. The exporter groups represented by FEBEC (Federation of Brazilian Coffee Exporters) were strongly against a new Agreement and defended a position of free markets for the long term advantage of Brazilian coffee commerce. In recent FEBEC meetings, the sentiment of many of the members was noted to have changed and after much debate a resolution was adopted in favor of the renewal of the ICA.

On March 18th at a meeting in Brasilia of the Coffee Sector Chamber which is a Commission designed to partially substitute some of the policy decisions formerly taken by the extinct IBC (Brazilian Coffee Institute), the various segments of the industry presented their suggestions to the government members who will head the Brazilian delegation to the ICA meetings in London in early April. It should be noted that the Coffee Sector Chamber was formed by and is subordinated to the Ministry of Agriculture. The Chamber is composed of appointed members of all segments of the Brazilian coffee trade; Cooperatives, Exporters (FEBEC), Producers (CNC and CNA), Rural Societies, Soluble Industry (ABICS) and Roaster Industry (ABIC).

The producers groups represented by the National Coffee Council (CNC) presented their arguments and proposal for the renewal of the ICA with export quotas which would not infringe in any way with Brazil's traditional share of world markets. The exporter groups represented by FEBEC presented their proposal recognizing the need for renewal of the ICA but suggesting the control of supplies by a system of "buffer stocks." The exact details of the systems are not available but basically it would mean the retention of stocks to be controlled by the ICA with percentages of retention and release based on a range of minimum/maximum world market prices.

The Brazilian delegation headed by Dorothea Werneck, National Secretary of the Economy and Ambassador Clodoaldo Hugueney, International Assessor of the Ministry of Economy, will now form their report based on the Coffee Chamber's proposals for presentation to the President of the Republic, Fernando Collor. It is a foregone conclusion that the President will approve the report which will represent Brazil's position at the next ICA meetings.

The change in Brazil's position vis a vis the ICA does not necessarily mean a new Agreement will be reached. There are many delicate points that must be resolved between importer and producer members. Also the mechanics of introducing an export quota system again in Brazil is a serious problem. In the past quotas were distributed by criteria formulated by the now extinct IBC. The last system of distributing quotas was through the auction of export rights. Exporters bought quota through the auction of export rights and the cost was largely discounted from the prices the exporters could pay growers. This may not exactly coincide with the hopes of the producers groups expecting to obtain better prices by the renewal of the ICA with quotas. On the other hand, "buffer stocks" or retention quotas must be financed by some source, and it is doubtful that importing members would be willing to participate.

92/93 Brazil coffee crop

The Minister of Agriculture announced on March 20th the first official estimate for the 92/93 Brazil coffee crop with breakdown as follows:
(millions of bags)
Minas Gerias --7.2
Espirito Santo --4.4
Sao Paulo --3.5
Parana --1.8
Bahia --0.9
Others --1.1
TOTAL: 18.9 Million bags

The Ministry's final estimate of the 91/92 crop was also announced as 27.4 million bags which points up a drop of about 30% in their estimate for the 92/93 crop. This drop was largely due to the biennial production cycle of the coffee tree and the 92/93 crop would normally be an off-year cycle. However, weather factors (lack of rains during critical growing periods) plus crop eradication and diversification and lack of proper agricultural treatment due high costs and interest rates combined with low market prices, all contributed to the larger than normal drop in production estimates for the 92/93 crop.

It should be noted that Brazilian private trade estimates for 92/93 crop range from 18.3 to 20.8 million bags. This compares with the recently announced USA Department of Agriculture estimate of 22.0 million bags for the 92/93 Brazilian coffee crop.

Silocaf builds in Brazil

The Trieste-based Italian group, Pacorini Finanziara, the parent company of SILOCAF DO BRASIL, recently closed a financing deal with the Brazilian National Bank of Economic and Social Development (BNDES) in the amount of US $6 million at current exchange rates. The funds will be used to construct an industrial unit in Vitoria, Espirito Santo for the processing of green coffee (Conillon and Arabica) with a capacity to handle 1.5 million bags per year. The total investment in the projects is evaluated to be about U5$17.5 million at current rates with funds from State sources and the parent company. Silocaf do Brasil is controlled by a Brazilian group called EIA Empreedimentos with the Pacorini interests representing 22% of the capital and charged with the technology involved in the project. The advanced technology for handling coffee was developed in Italy where Silocaf/Pacorini has an installation already operating in Trieste. The project designed for Vitoria will be based on the groups' Trieste experience and will be an innovation for coffee handling in Brazil with a complete computerized operation for receiving, storage, cleaning, polishing, classification and preparation of blends for export or local consumption. When in operation the SILOCAF company plans to buy green coffee from producers and after preparation, negotiate the product to local markets or for export directly to the principal world importers. It is interesting to note that the Silocaf/Pacorini group has recently closed a U5$14.5 million deal for development of a similar bulk green coffee silo operation in the port of New Orleans.
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Title Annotation:Brazilian farmers get economic help from government; country changing its stance towards International Coffee Agreement; 1992/93 coffee crop; Silocaf do Brasil to build new plant to handle green coffee
Author:Jones, Harry C.
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1992
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