Brazil Visit June 2009

Back to the weather. Too much rain. Winter in the Brazil coffee areas is ‘supposed to be cold’ (5-10 degrees at night, sometimes close to freezing) and dry. Well, this year is it rather warmer and wet.

Why does this matter?

Because Brazil’s vast crop relies on patio drying for the vast majority of the harvest and frequent rain showers and heavier storms wreak havoc with not only the drying but with the harvest itself.

Except for Monte Alegre farm, most of the growers (myself included) have harvested about 30-35% of their crops. Monte Alegre started a month earlier than most with selective picking (also a rarity in Brazil where indiscriminate ‘strip picking’ and patio drying of all qualities is widespread) so this large farm had gathered in more than 60% of their estimated crop.

Rain showers are frequent and troublesome during the days but, by their nature, the showers are isolated. Just before I arrived, a freak hail storm hit Bothelos not 20km from my farm, destroying crops and damaging warehouses, and leaving many centimetres of hailstones on the ground.

Traditionally, commodity traders focus on the months of June to August in Brazil for signs of a frost that could potentially destroy millions of bags of production. The state of Paraná used to produce many millions of bags of coffee (in fact it used to be the biggest coffee producing state in Brazil) but killer frosts in the past led coffee production further north into regions like the Cerrado in Minas Gerais. While the risk of frost damage to Brazil’s coffee crop remains, this production shift and the effect of climate change may have lessened the chance of such an event.

Not long ago, drought also threatened the coffee producing heartlands of South Minas but this year’s weather leading up to the harvest was near perfect.

Now, however, unseasonal rains threaten not only the quality of this year’s crop but may cause an uneven and irregular flowering of next year’s.

Professional farms will manage the weather using driers, covers on patios, covered drying (such as polytunnels) and production techniques to manage pulping, natural drying and, in some cases, a fully washed process, depending on the weather forecast for the coming 7 days.

Having my own farm now has given me valuable insight into what really goes on in a small scale farm. Constant investment, renewal, new equipment, repairs, not enough workers… you name it.

However, a great many farms in Brazil (as elsewhere in the coffee world) are not ‘professional’ in that sense of the word relying, instead, on rustic harvest practices. And, without reference to quality, many millions of bags of rain damaged commodity grade Brazil coffee changes hands. Once again, I believe we will see the gulf of quality between commercial and specialty grade coffee continue to widen.

The core of Mercanta’s business is comparative, analytic and frequent cupping in order to find the world’s best coffees. The aim, however, of many players in the market is to avoid this costly and time consuming step. Many brokers and commodity importers prefer, instead, to rely on unsupported claims rather than an objective quality assessment. Yet we feel that the results speak for themselves. Our business is equipped with highly skilled cuppers (6 with international Cup of Excellence jury experience), two custom built labs, and also the time, staff, and operational structure to make cupping part of our daily routine. Since we do not roast coffee commercially, we do not have that crucial and time-consuming task to oversee. In fact, I am always surprised by the time and money resources devoted by some medium and small-size roasters to try to find ‘best of origin’ lots of specialty coffee, travelling far and wide and taking their eyes off their own business, when the very coffees that they are looking for are already safely in store in a warehouse and ready to be delivered!

While growers grapple with weather woes, the crop comes in. Since the growers that we deal with are amongst the finest in Brazil, quality sorting and differentiated lots are very much part of their business. I was amazed at the quality of coffees that I cupped (I am pleased to say including some from my own farm Toca da Onça ‘Inglaterra’) considering the very early stage of the season and complete lack of rest in the silos.

We will see some new crop Brazil shipments as early as August this year, including pulped and fully washed lots.

As always with origin trips, you can gain a wider sense of developments in the specialty coffee sector as a whole. Many of the developments are encouraging. Slowly but surely, more and more people are aware of coffee as a differentiated product in its own right – not coffee the ‘ethical’ statement or coffee the ‘environmental’ statement or coffee the location in the High Street or coffee the ‘lifestyle’ statement. But rather coffee itself. What a revolutionary idea!

Some things, however, are more troubling. Medium sized professional farms (2500-5000 bags of quality coffee production annually) are still not earning the revenues they need to keep pace with the efforts and constant investments needed to produce fine coffee consistently.

Mercanta has always made it abundantly clear. We do not mind paying any price that the grower may ask – we really don’t. But, Mercanta knows better than any other importer the fine sensitivity between volume and price, even for the exact same lot of coffee. For example, if ‘Fazenda X’ produces 5000 bags of 84 scoring coffee of identical quality, the price for that crop is completely different depending on the volume offered. The secret lies in getting a decent average price and the irony lies in the fact that identical coffee has a different price depending on the volume being offered.

Why is this?

Put simply, coffee is a very imperfect market. The existence of a commodity price instrument for coffee, as I have often maintained, is a curse that will never fully go away. The idea that coffee is a generic product (that is the essence of a ‘commodity’) has hindered the development of coffee as a premium or differentiated beverage more than any other single factor.

Coffee roasters are actively discouraged from using better quality beans since retail prices in major multiple supermarkets are essentially fixed in two or three price categories. In this environment, the use of better (costlier) beans by the roaster simply means making less money.

By the same token, why prepare a fraction better quality than is necessary if your aim is to deliver coffee to a lowest common denominator commodity instrument which does not reward that effort at all? Such commoditisation of coffee has also led to constant global over-production (often by the very growers who produce low quality beans) further perpetuated by a huge ethical marketing campaign to ensure that growers are not rewarded for quality (as they are in the Cup of Excellence programme) but instead are rewarded simply for growing coffee (Fair Trade). Unless there is an implicit link between quality produced and price paid, then coffee (the global industry) will simply lurch from one crisis to another.

But enough of the gloom – the truth is that awareness of and demand for Specialty coffee is booming in ‘traditional’ and new markets; particularly in Asia. In the midst of the worst economic crisis in memory, Mercanta’s sales remain extremely buoyant. Since we have roasters customers in more than 30 countries, I think that this is a useful bell weather of the overall state of industry. Our success is, in turn, success for the growers.

Brazil still produces millions of bags of commodity grade coffee for the industrial giants. But more importantly, 1% or 2% of Brazil’s 40 million bags is exceptional single estate specialty coffee professionally produced and with limitless potential for more growth.

Interestingly, there is another market now in place besides the commodity market in Brazil. Driven by Illycafé and Nespresso, a premium quality premium price market has evolved in the upper echelons of the quality pyramid. It is not just what Mercanta and other specialty importers and roasters are prepared to pay, nor just contracts from the premium Asian markets, but there are two considerable volume buyers in Brazil whose prices for estate coffees – and Yellow Bourbon in particular – will draw a floor under the price for specialty grade beans across the board.

Brazil is the biggest origin supplier to Mercanta, and with good reason. Reliable, friendly, professional suppliers known to us for years, constantly improving and updating. Huge regional selection, wide array of production methods, varietal selection and experimentation, micro lots… At Monte Alegre I even saw a new machine for separating green and red cherries – like the electronic eye sorter for green beans export preparation but, in this case, for coffee cherries.

One thing that did come up during the trip is that a Coffee Hunter Field Trip is long overdue to this land of specialty coffee. In fact, our first ever Field Trip was to Brazil and it is time to renew our customer acquaintance with this beautiful origin.