Brazil Suspends Coffee Imports Amid Opposition From Farmers

  • President Temer will analyze the matter before final decision
  • Domestic prices have plummented 22% since peaking in November

Brazil’s government temporarily suspended a move to import coffee amid a battle between farmers and the country’s instant-coffee industry.

President Michel Temer made the decision late Tuesday after Government Secretariat Minister Antonio Imbassahy met with congressmen and farmers from coffee-producing states in Brasilia, according to a statement posted on the secretariat’s website.

According to the statement, the president decided to reassess the matter after lawmakers presented data showing Brazilian robusta coffee supplies are sufficient for domestic needs and said that imports would harm farmers.

Temer’s decision represents a swift reversal on the issue that has pitted growers against processors in the country, the world’s biggest producer and export of coffee. On Monday, Agriculture Minister Blairo Maggi said the government would allow so-called green robusta imports from Vietnam, following months of lobbying from Brazilian makers of instant coffee. On Tuesday, Congressman Ricardo Ferraco, from Espirito Santo state, filed a bill in the country’s Senate to stop the move.

A two-year drought has led to a collapse in output of robusta beans in Espirito Santo, the country’s biggest grower of the variety. Deputy Evair Vieira de Melo, who’s from the state, said Tuesday before the meeting with Imbassahy that if the decision to allow imports wasn’t reversed, "the weight of it" would fall on Temer.

Brazil unsuccessfully tried to import green coffee in May 2016. The government had authorized 400 metric tons of coffee from Peru and later rescinded the measure after producers protested. The issue is pitting the country’s roasters and the instant coffee industry against farmers.

Imports are needed because of the scarcity of beans, Maggi said on Monday. He said the country lost instant-coffee market share in January and February.

“I respect growers, but imports are needed amid a lack of coffee in the domestic market,” Maggi said.

Plunging Prices

Domestic robusta prices have plummeted 22 percent from a record high on Nov. 14 on import talks, according to the University of Sao Paulo’s Cepea research unit. Since then, coffee farmers in Espirito Santo have lost 500 million reais ($162 million) of potential revenue because of the price decline, Melo said.

Brazil’s agriculture ministry on Monday published phytosanitary requirements to import robusta green coffee from Vietnam. It includes a 1 million-bag quota for the domestic market and unlimited amounts of green coffee imports for processing and re-exporting, a practice known as drawback, Luis Eduardo Pacifici Rangel, Brazil’s secretary for agricultural defense, said by phone.

Potential importers may be concerned that beans grown abroad could bring in pests or other phytosanitary threats into the country’s farms, Johannesburg-based trader I. & M. Smith Ltd. said in a report on Tuesday. While this could slow the pace of possible inbound purchases, once successful imports are completed, the pace could accelerate soon after, it said.

Raising Cattle

Robusta prices in London are up 53 percent in the last 12 months amid supply concerns, while arabica futures in New York have climbed about 26 percent compared with a year ago.

The president of Brazil’s top robusta grower Cooabriel, Antonio Joaquim de Souza Neto, said imports would discourage robusta coffee farmers from producing the bean.

“Growers will convert their farms to produce pepper or raise cattle," Neto said by phone before Temer’s decision on Tuesday. Cooxupe, Brazil’s largest arabica-coffee cooperative, also opposes coffee imports.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE