The decrease in the coffee sack price has been a challenge to this sector in 2019. The impact from the reduced price is being noticed by African growers as well as Brazilians, who are a reference in this market and is considered as one of the most traditional suppliers in the world. Brazil is also the largest beverage grain growers and the second largest consumer in absolute numbers. Vietnam, Colombia, Indonesia, and Ethiopia are among the top-five worldwide coffee exporters.
Even though the Brazilian coffee harvest has been increasing, profits have not kept up proportionally. According to the Brazilian Coffee Exporters Council (Cecafé, in Portuguese), the exportation volume from Brazil, just up to April of this year, has already been 25% higher than in 2018. Although the value of US$ 370 million dollars only represents a 1% price increase during that period.
One of the main motives for this is the reduced price in coffee sacks. At the beginning of 2019, one sack cost R$ 389. Moreover, for comparison, in 2017, the price reached R$ 500. That decreased price is due to the record Brazilian harvest in 2018 that registered a 37% increase and thus generated increased supply.
The reality of the African coffee market
The market share of coffee from African countries to the international market has reduced a great deal since the 1970s when their market share amounted to 32% of the global market. Nowadays, Africa’s market share is only 10%, according to the International Coffee Organization. One of the reasons for that decrease in the global market share is competition from Asian countries, like Vietnam, Indonesia, and India.
Besides that, there has been a change in consumer preference that has seriously affected African production. Previously, the continent’s expertise had been focused on Robusta coffee, a more bitter type, cheaper, and more caffeine. Currently, the market prefers a higher quality of Arabic coffee. Ethiopia is a leader in growing that type of coffee on the continent, at a rate of 17 million sacks annually.
According to José Dauster Sette, the president of the International Coffee Organization, the reality of Brazil, as it is the largest coffee grower and exporter, can serve as an example to the African continent in three sectors: “By training coffee-grower entities in ways of cutting costs in supplying extension services through cooperative initiatives, enhancing the efficiency of the growing sector by increasing productivity and profitability, and in developing domestic consumer markets to maintain better prices paid to growers, and increase their resilience to the volatility of international prices.”
Although there are good expectations of increasing production in the next few years, the situation on the continent still requires close attention. “The issue is not just applying technology on the farm. However, it is also necessary to look at the situation away from the farm [in the market]. And many people do not understand this issue in Africa. They believe it is just necessary to apply Brazilian technology. This can work while there is help, but afterward, it goes back to how it was previously. It is necessary to make a structural change,” argues Carlos Brando, president of the world council on the Global Coffee Platform.
How can we increase consumption?
One of the main challenges for the coffee market in Africa is its low consumption. According to the International Coffee Organization, the consumption of this beverage is much lower compared to the rest of the world. Besides that, no African country is on the list of the largest per capita coffee consumers.
According to the African Fine Coffee Association (AFCA), the increase of the internal consumption is vital for transforming the local supply chain, as well as contributing to balancing supply and demand. The domestic consumption is viewed by the institution as a solution for the market, as increasing the awareness of the producer on demands, strengthening the national private sector, and offering a vital experience for the eventual exportation of value-added products.
One of the routes for this increased consumption has been investments in specialty coffees, utilizing differentiated production techniques, promoting new experiences and flavors. The demand for these kinds of products has risen all over the world. Besides that, according to AFCA, special types of coffee can add financial advantages to small-scale producers.
The New International Coffee Agreement
During the International Coffee Council meeting – that took place this past March 29 in Nairobi, Kenya –, Brazil was chosen to head the negotiations on the New International Coffee Agreement that will go into effect starting in 2021. The current agreement, that has been in effect since 2007, was developed to facilitate international trade.
According to José Dauster Sette, from OIC, Brazil is leading a task force that was constituted for examining the proposals by members regarding the updating of the Agreement, while considering the 20130 UN Agenda on Sustainable Development. “We are at the beginning of a long negotiating process that must be concluding by signing a new Agreement in 2021, which must be put into effect soon afterward, after ratifying the covenant by different national parliaments”, he explains.
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For the Brazilian government, the choice was made because Brazilian coffee is a “reference on global sustainability, as the laws assure the preservation of biodiversity and the rights of those who work in growing coffee and the coffee industry.”
“As well as the recognized competence and quality of Brazilian diplomacy, Brazil is accredited to perform the leadership role in these negotiations as it is the largest producer, exporter, and the second largest consumer of coffee in the world,” concluded Dauster Sette.