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Home Uncategorized Brazil, Vietnam tighten grip over coffee market

Brazil, Vietnam tighten grip over coffee market

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A towering machine rumbles through the fields of Julio Rinco’s farm in the Brazilian State of Sao Paulo, engulfing whole coffee trees and shaking free beans that are collected by conveyor belts in its depths. This automatic harvester is one of several innovations that have cut Rinco’s production costs to a level that few who use traditional, labour-intensive methods can match.

With increasing use of mechanisation and other new technologies, the world’s top two coffee producers, Brazil and Vietnam, are achieving productivity growth that outstrips rivals in places such as Colombia, Central America and Africa.

They are set to tighten their grip. A plunge in global coffee prices in recent months, to their lowest levels in 13 years, has begun to trigger a massive shake-out in the market in which only the most efficient producers will thrive, according to coffee traders and analysts.

Rival producers elsewhere in the world are increasingly likely to be driven to the margins, unable to make money from a crop they have grown for generations. Some are already turning to alternative crops while others are abandoning their farms completely.

Irreversible trend

Such shifts are almost irreversible for perennial crops such as coffee, as the decision to abandon or cut down trees can hit production for several years.

“Brazil and Vietnam have had consistent increases in productivity, other countries have not,” said Jeffrey Sachs, director of the Centre for Sustainable Development at Columbia University, citing advances in mechanisation, selective crop breeding techniques and irrigation technology.

In Colombia and Central America, coffee is typically grown on hillsides where mechanisation is more difficult, and hand-picking cherries has kept production costs relatively high. The African sector, meanwhile, is dominated by small-scale farmers often unable to raise the capital needed for new techniques.

Rinco bought his harvesting machine for around 600,000 reais ($155,600) and is paying the agricultural supplies company with coffee, delivering 400 bags a year over four years. This kind of bartering is common in Brazilian farming.

One such machine in Brazil replaces dozens of people in the field. Even with financing and fuel bills, farmers and machine manufacturers say there is a reduction of 40 to 60 per cent on harvesting costs.

“Beyond the lower costs, it made my life less complicated,” said Rinco, relieved at no longer having the gruelling task of hiring suitable pickers every year for the harvest at his farm in the Sao Joao da Boa Vista area.

Brazil and Vietnam now produce more than half the world’s coffee.

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