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Brazil Coffee Storage Will Raise Coffee Farmer Income
It appears that Brazil is going to copy a practice from United States agriculture, storing excess crop production. It is likely that Brazil coffee storage will raise coffee farmer income. Currently there is not enough storage capacity in the Brazil, the premier coffee producer in the world. The Brazil Ministry of Agriculture expects to increase available monies for coffee storage by nearly a billion dollars.
The point is that coffee prices, just like corn prices, soybean prices, and wheat prices, tend to fluctuate. When a coffee farmer has no storage capacity he is forced to sell at harvest time. This is typically when he will get the lowest price for his crop. In the United States farmers are paid to hold corn and soybeans off the market. This helps stabilize crop prices for wholesale coffee and allows farmers to sell their crops at a later time and, usually for a better price. This is what Brazil plans to do. As with the US experience, it is likely that Brazil coffee storage will raise coffee farmer income.
The storage question is especially pertinent at this time. Coffee prices were near all-time highs last year. Since last year Arabica coffee futures have fallen by more than a third. This year is expected to provide a bumper crop in Brazil, which will tend to drive coffee prices even lower. Brazilian Agricultural Ministry estimates are that the country will produce just over fifty-two million bags of coffee in 2012, up from forty-nine million bags in 2011. At one hundred thirty-two pounds a bag that is an increase of four hundred thirty-five million, six hundred thousand pounds of coffee. Brazil coffee storage will raise coffee farmer income because coffee growers will be able to hold a significant part of their crop off the market, keeping prices from falling excessively.
Price stability, as well as a good income for coffee growers, is the long term goal in Brazil. Boom and bust years do not lead to prosperous coffee growers. In fact, a boom and bust agricultural cycle tends to drive small farmers out of business and large farm businesses in to bankruptcy. The ability to store a reasonable fraction of each year’s coffee crop will lead to market stability just as Brazil coffee storage will raise coffee farmer income. Programs like this help farmers.
Just recently we wrote about how credit unions support organic growers in Mexico. The supply chain, available credit, and government support can make the difference between success and failure for farmers of any crop.
From the viewpoint of the healthy organic coffee producer, storage is also a good idea. Although organic coffee commands a higher price, the market can be spotty.