The coffee industry’s suffering continues in Brazil as the end of 2024 approaches

Three years after the frosts that struck Brazil and in the midst of other ongoing climate disasters, farmers in the world’s largest coffee-producing country are still struggling to recover, according to Global Coffee Report.

Coffee production in Brazil

Brazil’s coffee fields extend for hundreds of kilometers within sight from the far reaches of the Paraná plains to the south across the state of São Paulo and in all directions of Minas Gerais.
With an area larger than Madagascar or Kenya, Minas Gerais is home to about 50% of South America’s entire coffee crop in an average harvest cycle and 65% of Brazil’s total Arabica coffee production.
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In what growers describe as the natural harvest cycle, by mid-August the trees are bright green, fully recovered from the stresses of the actual harvest and ready to flower for the next crop which usually begins in the second half of September.
But not this year, 2024. Instead, more than half of the farms have withered.
This includes the majority of the branches on which new fruits usually grow, turning into red berries ready for the next harvest.

Threats to the global coffee industry

Analysts say it is a sad sight for any coffee lover as these fields will not produce even a fraction of the normal harvest they previously produced in light of the continuing problems. From August 11 to 14, 2024, a severe weather wave hit Arabica coffee production in Brazil and caused new damage to farmers and suffered… The Cerrado Minero and Alta Mogiana regions had the greatest damage and South Minas reported less impact.
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“It’s a disaster. There is no other word to describe our current situation,” Brazilian coffee farmer Marcelo Paterno told Global Coffee Report about conditions on his farm in the Campos Altos region of Minas Gerais state.

Worse harvest for the coffee crop

Marcelo Paterno said: “In the last harvest I got less than half of what I usually get. Even in the harvest after the frosts of 2021 I got more and when you look at these fields it is very clear to anyone who knows coffee that the next harvest will be worse.”
Carlos Augusto Rodriguez de Mello, president of the world’s largest coffee cooperative, headquartered in Guaxubi, in southern Minas, says, “Initial expectations were that the harvest in 2024 would be 8 to 10 percent greater than the harvest in 2023, but in the end it was not met.” This is simply the size.
Accordingly, De Mello told the local press, saying: “In early August, we were surprised because of the climate and that the harvest was not larger or even similar to the previous harvest in 2023, which leads us to say that the 2024 harvest will end smaller than last year.”
From agricultural experts to analysts and cooperatives, industry experts agree that the 2024 harvest is expected to end at least 10% lower than the 2023 harvest.

The crisis of Brazilian coffee companies

Meanwhile, court documents recently seen by Reuters showed that banks that financed two Brazilian coffee companies last week sought to restructure debts under court supervision, and have a total of 1.1 billion Brazilian reais ($181.6 million) in credit with the two companies.
The documents indicate that the amount refers only to advance funds provided by the two banks to traders “Atlântica” and “Cafébras” in contracts linked to future coffee exports.
It is not known whether traders have other debts to coffee roasters or importers in connection with supply deals.

Agricultural sector debt in Brazil

The documents showed that the largest bank in Brazil, the state-controlled Banco do Brasil, had the largest share of debt at 765 million Brazilian reais, followed by BTG Pactual Bank with 181.5 million Brazilian reais and Banco do Nordeste with 100.9 million Brazilian reais. .
Three other banks have smaller loans outstanding from farm credit companies.
Atlantica and Cafebras, owned by Brazilian coffee group Monte Santo Tavares, filed a request last week to negotiate a large portion of their debts in court, a legal step that could precede bankruptcy proceedings if negotiations are unsuccessful.
The move has left the coffee market in a state of extreme tension, as coffee importers fear that they will not be able to deliver their orders or that other exporters in Brazil will face financial problems as coffee prices rise dramatically.