Brazilian Coffee History - A somewhat definitive guide!

September 12, 2017

 

When I was writing my business plan during 2015 one of the first things I studied was the history of Coffee in Brazil, more in regards to the socio-economic/political aspects. By no means a definitive account happenings but I've hopefully captured and aggregated the most important events.

 

I hope to add to this piece in an iterative manner; in time, when I come across further information, and, also from anyone who wants to participate with sources/information, please do so in the comments and in time I'll make revisions to this article. If anyone would like to contribute with archived photos that would be more than welcome; the article is farely text heavy. Also, I'd love to have designed a info-graphic for the timeline of events, all welcome to contribute with this one!

 

The article has been written in my own wording, I've summarised and paraphrased most articles and provided a source at the end of each subsequent paragraph. The sources were mostly from English-written articles, so once we begin delving deeper into the Portuguese archives, I can hopefully pull together an even more comprehensive article. I'm happy to co-mention contributors in all subsequent revisions and additions. Cheers!

 

PS. I'm my own editor so excuse the grammer, punctuation and spelling!  

 

Coffee was introduced in Brazil by Francisco de Melo Palheta in 1727 from Cayenne, French Guiana.

 

 

 

Today, Brazil is the world's largest coffee producer and is becoming a significant player in the specialty coffee industry. Coffee is grown in the states of Paraná, Espirito Santos, São Paulo, Minas Gerais, and Bahia. (CoffeeResearch.org).

 

 

Brazil Coffee Origins

Brazil Specialty Coffee Association, 2014

 

 

Francisco de Melo Palheta depicted on the 400-thousand cruzeiro bank note of 1971

Blog da Tribuna do Pará, 2012 - link

 

Coffee growing in Brazil in the 19th was synonymous with wealth and abundance. In 1840, Brazil became the largest coffee exporter in the world where the “coffee barons” controlled the nation’s wealth and heavily influenced national policy. Brazil achieved much progress in this era with the elite investing in banking institutions, infrastructure, credit expansion and industrialisation (TheBrazilianBusiness.com, 2012).

 

Slavery was abolished in 1888 nearly crippling the industry not because of increased labour costs, but the scarcity of a willing workforce; the solution was found in the contracting a European workforce.

 

Slaves at a coffee yard in a farm. Vale do Paraiba, Sao Paulo, 1882.

Marc Ferrez/Moreira Salles Institute Archive - link

 

This prosperity continued into the beginning of the 20th century with Federal intervention into Brazil’s coffee market beginning in 1906 on the eve of a record high yielding crop and expected sharp fall in prices due to subsequent over supply. As a result, coffee-growing states agreed to buy up and stockpile surplus stock at a reduced price and introduced other fiscal policies to protect growers. (CoffeeResearch.org)

 

When the Great Depression of 1929 hit, demand for the world coffee crop abruptly ceased. With the US and Europeans no longer buying up the huge volumes of coffee from Brazil, prices plunged, and the at the time government of President Getulio Vargas ordered for the thousands of coffee bags in Brazil to be burned. (TheBrazilBusiness.com).

 

The picture below captures this event taking place in the Alemoa zone of the coastal export port city of Santos.

 

Burning of Coffee Stockpiles, Alemoa, Santos

Preising - link

 

The Federal Government soon stepped in and introduced national policies to regulate the industry, one of which, in the 1930s, lead to the mass destruction of coffee plantations to again raise prices only to have prices once again depressed at the onset of World War 2 (CoffeeResearch.org)

 

In the 1950’s production started to rapidly increase and along with it stockpiles of raw coffee. This lead to the invention of the Brazilian Institute of Coffee (IBC) in 1953 with the purpose of administering market policy more effectively. (World Bank, 2001)

 

In 1953 the Brazilian government then looked abroad to add further stability by forming an international coffee agreement with other countries and by setting production quotas to increase prices; the International Coffee Organization (ICO) was born in 1962. (World Bank, 2001)

 

As a set volume was expected, the focus was on coffee prices and quantity, rather than quality. The effect of setting quotas protected the larger produces whilst blanketing out the speciality coffee sector. Of the political reasons for regulating and ensuring high coffee prices, the USA’s belief was that higher prices would reduce the threat of communism. (World Bank, 2001)

 

Brazilian coffees of this era were renamed either Santos 1 or Santos 2 where Santos was the port from which coffee was exported. Coffee producers would mix together higher-quality coffees with low-quality coffees in order to meet targets. (World Bank, 2001).

 

In the early 1960’s production again outstripped demand with the Brazilian government answering with implementing programmes supporting the uprooting of mature trees, but even so, by 1966 Brazil had surplus coffee stockpiles of more than 60 million bags and over 2.5 billion coffee trees in production. (Labour Law and Practices in Brazil, United States Bureau of Labor Statistics, 1967)

 

By 1972 the quota system became ineffective with parties not being able to agree on set quota volumes. With the collapse of the ICO and the need to regulate its national market, Brazil set up an international supply-with-holding programme in the form of a trading company which was funded by Brazilian, Colombian, Ivory Coast and Portuguese interests. Again, due to internal interests, this “grower’s controlled” system did not work. (World Bank, 2001)

 

In 1975 Brazil was plagued by great frosts devastating the annual crop reducing it by half and again by 17% in 1976, which lead to a tripling of world prices in the years from 1975 to 1977, refer to peak spot price of 1976 in Figure 3-1. This encouraged further clearing and expansion in coffee growing areas.

 

Naturally, in 1977 the prices began to again deflate (over supply) leading to Brazil having to look externally for help which came in the form of the latin group Bogota Group which set about interfering with the futures market to inflate prices. This initiative ultimately failed. (World Bank, 2001)

 

Historical International spot-prices for commodity coffee

 

 

Coffee prices continued to fall due to increased production and growing stockpiles. The US could not handle the fluctuating prices and believed low prices would raise poverty levels in Latin America whilst the European nations began to compensate the poorer coffee producing nations to alleviate the economical burden.

 

Understanding that a formalised fiscal body was required to provide ongoing support and ensure stabilised prices the industry successfully re-introduced the once defunct ICO quota system in October of 1980. The system functioned until July of 1989, collapsing due to disagreements between members (primarily Brazil) on economic, and, varietal and quantity distribution clauses written into the quotas.

 

By now the quota system had developed into a two-tiered system with non-member countries, mostly eastern European, falling into an unstructured and non-governed tier two. Excess production from the coffee growers was being dumped onto non-member countries at heavily reduced prices causing unrest from the member countries, which had been paying premiums. (World Bank, 2001)

 

Over the years the Brazilian farmers had their own growing dissatisfaction towards the IBC, which they considered to be inefficient, highly bureaucratic and red-taped. In years of high yielding crops, the Brazilian government held down premium prices in order to keep inflation in tow. There were other initiatives in this time, such as government buyback of robusta to prop-up prices, an exporter retention programme and an quota auctioning-off programme, though each seemed to widen the distance between the government and growers. (World Bank, 2001)

 

This dissatisfaction towards the IBC lent itself naturally to dissatisfaction towards the ICO. When Brazil finally broke the quota and protection laws for both the coffee and sugar industry in July 1989, subsequently both the IBC and the IAA (sugar) bodies disbanded. (CoffeeResearch.org). In March of the following year the Brazilian Government liberalised the coffee trade and abolished the IBC.

 

A revolution in how coffee was exported in Brazil was born, bringing about a reform in how coffee was grown, processed, and treated. Slowly the increased quality and variety of coffee available in Brazil became evident as consumers exercised their new right to purchase estate specific specialty coffees. (CoffeeResearch.org)

 

Today Brazilian coffee is grown in over 13 Brazilian states with the largest located in the states of São Paulo, Minas Gerais, Rio de Janeiro, Espírito Santo, Bahia, Paraná and Goiás (TheBrazilianBusiness.com, 2012).

 

Annually Brazil is producing around one-third of the world’s coffee and its country’s top 50 producers make up 90 percent of these exports! The 2015 harvest is estimated to be just over 50 million 60kg-sacks, and at the time of publishing of this article, estimate yield for 2017/18's harvest (July to June) is set to be at 52.1 million 60-kg bags. (USDA, 2017) - link.

 

Yes, They've got a zillion tons of coffee in Brazil.

 

-dh.

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