Rodrigo de Freitas Silva’s coffee farm in the heart of Brazil is flourishing, even during one of the worst price routs in decades.
Over the past dozen years, the 41-year-old has expanded his growing area to 220 hectares (544 acres) from 12.5 hectares, with yields doubling. His whole farm is mechanised, and 90% is irrigated. Most important, even as coffee prices globally trade near the lowest in 13 years, Silva is profitable and expects to increase production with potentially higher yields on more land.
"I still have room to triple my coffee-planted area, only considering the farms I already have," Silva said, while showing a space that will hold a lab to classify coffee on his farm in Jeriquara municipality in Sao Paulo state.
Brazil’s coffee boom is posing huge challenges for coffee farmers in various corners of the world. Many growers, from Nicaragua to Tanzania, produce fewer bags of beans from each hectare, pay higher fertilizer and labor costs, and export at currency rates that aren’t as favorable as that of the Brazilian real. The depreciation of the real has given its exporters more of their local currency for every dollar of coffee shipped overseas, an incentive to grow more. Many non-Brazilian farmers are dealing with benchmark prices on ICE Futures US in New York that fall short of their cost of production. Prolonged losses and limited access to credit are spurring some growers, from Central America to Africa, to leave the business.
No such signs of strain appeared in a crop tour last week across coffee farms along a stretch of more than 1,700 kilometers (1,056 miles) from the Mogiana region in Sao Paulo to the southern and Cerrado regions in Minas Gerais, areas that collectively produce 70% of Brazil’s arabica beans, the preferred variety of roasters such as Starbucks Corp.
Everywhere, from along the roads to the tops of mountains, mature groves or a sea of baby green trees filled the view. Among them walked farmers who couldn’t hide the pride they feel about their expanding harvests.
"I’ve been expanding to new areas and renewing old groves with double the yields," Silva said. He has no plans to stop investing because coffee prices are lower. "I’m still turning a profit with coffee."
Silva expects to collect 10000 bags of arabica beans in 2020, almost triple this year’s crop, the lower production year of a two-year cycle. He reinvests profit to expand, mechanize, irrigate and heavily fertilize his farm. In 2016, his yield in one part of the farm peaked at 136 bags per hectare, and his average yield ran about 50 bags. A bag is 60 kilograms (132 pounds). Last week’s crop tour across Brazil’s coffee belt revealed mostly healthy, well-treated trees. Along roads in Sao Paulo or Minas Gerais, new plantings have emerged, surrounded by harvesting machines and even giant pools for irrigation.
Brazilian farmers used profits from times when prices were higher to mechanise, replace low-yielding trees and improving husbandry. That boosted output and reduced costs for many.
This high-speed locomotive doesn’t seem to be hitting the brakes, signaling more bumper crops.
Unless drastic weather problems arise, in 2020 the South American nation may reap another record crop of as much as 70 million bags, according to Marcos Figueiredo, a farmer and warehouse operator in the Araguari municipality of Minas Gerais.
"The crops have never been so well-treated," Figueiredo said.
This ample supply explains why futures can’t sustain higher levels, Rodrigo Costa, the US-based director at Brazilian exporter Comexim, said in telephone interview. In addition to Brazil, Vietnam and Colombia have also invested in recent years to boost production, adding to global supplies, Costa said.
Coffee futures Wednesday plunged the most since 2015 in New York, snapping a 19% rally in the past two weeks spurred by speculation that wet weather or frost might hurt the crop in Brazil. Most-active futures are trading near the lowest levels since 2005.
That doesn’t appear to discourage 66-year-old coffee grower Nairo Teixeira Dias in the Machado municipality of Minas Gerais. Most of Dias’s areas are in the mountains, where picking can’t be mechanised and harvesting costs are almost three times higher than on the mechanised farms. Still, Dias hasn’t had losses on his 150-hectare coffee farm.
"Margins are tighter, of course, but coffee is still better than other crops," he said.
Farmers interviewed on the tour don’t expect to cut the use of fertiliser or technology.
In the savanna of Minas Gerais, 37-year-old Noe Francisco Bartolomeu Rodrigues has pushed for crop renewal and expansion as one of the owners of Farroupilha, a diversified grower group with 21 crops, to cut costs, improve yields and boost quality on 2 070 hectares of fully mechanised and irrigated coffee fields.
Farroupilha’s harvest in 2020 is expected to surge, in part because newly planted areas will start to produce. The group also plans to renew an additional 700 hectares during the next four years.
"Older, non-irrigated areas whose productivity was 25 bags per hectare were replaced by new ones with double yields," Rodrigues said.
Tres Pontas-based grower Givago Miranda doesn’t plan to make any reductions that might reduce yields.
"In 2020, I will replace again old areas with new ones to keep high levels of yield," he said in an interview. The renewal pace will depend on coffee prices, said Miranda, who cultivates 340 hectares. "We are seeking ways to produce cheaper and cheaper."