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Global Economy

Expensive coffee – concerned farmers

Lucas Bartelega anxiously walks through his coffee plantation, endless, straight rows of tall plants. But the otherwise juicy green leaves hang down brown and limp, with dried coffee cherries in between. Half of the bushes have died, says the agricultural economist.

"Some plants are so badly affected that not only the 2022 and 2023 harvests will be lost," says Bartelega. "They are so badly burned that I have to drastically cut them down to the root. It takes the plant three years to recover from it, which means this plantation here won't be producing coffee again until 2024."

Extreme drought, then frost

The plantation is located near Varginha, a city in the southwest of the Brazilian state of Minas Gerais. 70 percent of the Brazilian Arabica beans come from there, as well as most of the German coffee imports.

But last year the climate in the region went crazy, with drastic consequences for the harvest, says farmer Paulo Ronaldo: "In 2021 we suffered from an extreme drought, so that we already had a lousy harvest in 2021. I was firmly committed to 2022, But then the freeze came. We had never seen anything like it here, it was terrible and it hit us hard. I don't know what to do now."

Harvest collapsed by 25 percent

Brazil is the largest coffee exporter in the world. But last year's harvest fell by almost 25 percent compared to 2020 – and the price on the commodity exchanges rose. A pound of the popular Arabica bean cost around US$2.50 at the end of 2021, the highest it has been in more than a decade. That will be passed on to the coffee drinkers – in Germany as well as in Brazil. "We tried to avoid it, but the price hike was too big," says the waiter at a popular Sao Paulo cafe.

But does the increased price really reach those who bear the costs? "Hardly," says Adalberto Alencar, consultant for sustainable cultivation and co-founder of the Cepema Foundation from the state of Ceará. "Usually it's the producers and workers who are least able to siphon off the profits, especially small producers who are also hardest hit by the collapse of the harvest and the destruction of their fields by the extreme weather conditions. But I also have the impression that some players also use these moments to speculate with the prices."

Duties, Taxes and Freight

Dayany Ferreira agrees that the largest share of coffee prices is due to duties, taxes and freight costs. She therefore belongs to a cooperative that produces fair trade coffee: Coopfam. The biggest buyer is Tchibo.

"The fact that coffee is fetching high prices today is basically an illusion, at least for us producers. On the one hand, we all had crop slumps, so we have less to offer. On the other hand, our production costs have risen. The petrol that we need to run machines, Materials and fertilizers have also become more expensive and scarce. Many conventional coffee growers are struggling to find enough artificial fertilisers."

Ferreira itself has recently switched to organic production, so it is less dependent on artificial fertilizers, which are priced in accordance with the US dollar – and have therefore become more expensive simply because of the devaluation of the Brazilian real. But the transition takes time. And climate change is a big concern. Because one day of extreme weather can undo five years of work in just a few hours.

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