Public policies and the financing of coffee production in Brazil International Coffee Organization - ICO London, 21 September 2010 The Coffee Agroindustrial System in Brazil - Overview 1
Cafés do Brasil Number of establishments: 287,000 in 1,850 municipalities; 42 cooperatives, of which 30 are solely for coffee (33% of production); Roasters: 1,336; Soluble coffee industries: 9; Brands: 3,000; Exporting companies: 220. Brazilian coffee growing and its social significance in absorbing rural labour 2
Distribution of Arabica and Robusta coffees in Brazil Brazil: establishments with more than 50 Arabica and Robusta coffee trees as. at 31.12.2006 Hectares 0 a 10 10 a 20 20 a 50 50 a 100 > 100 Undeclared Total Nº of establishments Area planted (ha) Production Prod. Total (%) Total (%) Total (%) Average 220 554 76.89 751 670 37.13 13,829,304 35.15 18.40 18 306 6.38 276 099 13.64 5,109,256 12.99 18.51 9 813 3.42 322 856 15.95 6,793,175 17.27 21.04 2 781 0.97 206 170 10.19 4,736,613 12.04 22.97 1 656 0.58 352 408 17.41 8,877,584 22.56 25.19 33 733 11.76 114 969 5.68 0 0.00 286 843 100.00 2 024 172 100.00 39,345,932 100.00 Coffee: Changes in volume of Brazilian crop (Conab, 2010) 60.0 50.0 40.0 30.0 20.0 18.9 34.0 27.2 31.1 31.3 48.5 28.8 39.2 32.9 42.5 36.1 45.9 39.4 47.3 10.0 0.0 3
Brazil: Changes in area planted to coffee (in million hectares) 3.1 2.9 2.7 2.7 2.9 2.8 2.5 2.5 2.4 2.3 2.1 1.9 1.7 2.3 2.1 1.9 1.9 2.4 1.9 2.0 2.2 2.3 2.2 2.2 2.2 2.2 2.2 2.2 1.5 Source: Conab, 2009 Area - in million hectares Coffee: Annual changes in volume of Brazilian exports and export earnings volume 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 earnings Volume in millions of 60-kg bags Earnings - in billion US$ Source: Mdic, 2009 4
Rural Credit. Amount of credit granted in billion US$ (Bacen, 2010) 50 45 40 35 30 25 20 15 10 5-44.13 32.07 25.44 22.27 19.78 16.09 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 LEADING BRAZILIAN AGRICULTURAL PRODUCTS GROSS VALUE OF PRODUCTION (APRIL 2010 PRICES) Beef 17.35% Others 17.56% Pork 3.23% Beans 1.81% Rice 2.99% Coffee 5.35% Poultry 8.91% Milk 7.87% Maize 6.13% Soybean 17.54% Sugar cane 11.6% Source: CNA 5
Share of coffee in Brazilian crop production 2010 (in thousand tonnes) Wheat 5,369 Others* 816 Rice 11,320 Coffee 2,793 Beans 3,305 Soybean 68,674 Maize 54,797 Source: LSPA/IBGE, Sept/2010 Preparation: AGE/MAPA Percentage share of coffee in Brazilian crop production - 2010 (in %) Wheat 4% Others* 1% Rice 8% Coffee 2% Beans 2% Soybean 46% Maize 37% Source: LSPA/IBGE, Sept/2010 Preparation: AGE/MAPA / 6
Cafés do Brasil Sources of production financing Main CR sources: Compulsory resources RO financial institutions must invest 25% of demand deposits in rural credit operations; Rural Savings 65% of the value of rural savings deposits must be kept in investment by financial institutions; Official Credit Operations OOC resources supervised by the MF; Free Resources owned by the financial institutions, invested at market rates. Coffee Economy Defence Fund (Funcafé) Financing of coffee growing in Brazil legal investment possibilities: establishment of regulatory stocks; coffee growing rationalization and assistance; technological research, studies and analyses of Brazilian coffee growing; international technical and financial cooperation; assimilation of new cultivation and coffee processing techniques in small and medium coffee farms; promotion of cooperativism in coffee growing; support for development of roasting and grinding g and soluble coffee industries; promotion and advertising in internal and external markets. 7
Financing granted to producers and cooperatives by source of funds - 2009 Other sources: 4.37% FUNCAFE: 2.23% BNDES/FINAME: 7.02% Constitutional funds 7.27% Treasury resources: 0.55% Free resources: 4.20% Compulsory funding: 48.30% Rural savings: 26.05% Financing granted to producers and cooperatives by source of funds - 2010 Other sources: 3.75% FUNCAFE: 1.74% Treasury resources 0.19% BNDES/FINAME: 7.82% Constitutional funds 7.66% Compulsory funding 51.29% Free resources: 2.22% Rural savings: 25.32% 8
Source: BACEN Preparation: SPA/DEAGRI/CGAE RURAL CREDIT Marketing arrangements (2009) by crop Others 18% Cotton 8% Rice 15% Wheat 14% Soybean 3% Maize 20% Sugar cane 9% Coffee 13% Source: BACEN Preparation: SPA/DEAGRI/CGAE 9
Coffee Economy Defence Fund (Funcafé) Funcafé: Lines of credit. Basic conditions Budget 2010 funding lines: US$1.5 billion Operational risks for funding institutions Financial charges: 6.75% p.a. (not applicable to all sources of rural credit). Repayments to funding institutions: 4.5% p.a. Repayments to the Fund: 2.25% Lines of credit and beneficiaries: Costing, harvesting and warehousing - rural producers, producer cooperatives Financing for coffee purchasing FAC - roasters, processors and exporters 10
1,400,000,000 Funcafé annual amount of funding resources passed on to financial agents 2001-2009 1,200,000,000 1,193,390,652 In US$ 1,000,000,000 800,000,000 600,000,000 512,900,827 809,580,822 863,896,867 825,491,031 400,000,000 301,824,141 280,775,600 200,000,000 135,496,865 49,778,761 761 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Ano Source: MAPA/SPAE/DCAF Funcafé financing of coffee crop Credit line objective: To finance cultivation costs involved in coffee growing, such as fertilizers, crop protection products, labour and operation of machinery. 11
Funcafé financing costs of coffee harvest Objective: To finance inputs used for harvesting, such as herbicides, cultural practices, transportation to drying patio, drying and labour. Funcafé financing warehousing of coffee crop Objective : To provide rural producers and agricultural cooperatives with financial conditions that will enable them to warehouse their coffee during periods of low prices in the internal and external markets. 12
Funcafé Coffee purchasing by the domestic agro-industry FAC Objectives of this line of credit: To finance purchasing of green coffee by roasters, processors and exporters. Prices paid for coffee purchased in these operations, must be equal to or higher than the minimum fixed prices set by the Government. 2010 Crop - Distribution of financial resources in Funcafé credit lines Costing: US$182 million Harvesting: US$303 million Warehousing: US$546 million FAC: US$182 million Total: US$1.2 billion Resolution CMN nº 3.855/10 13
National Programme for Strengthening Family Agriculture (PRONAF) Resources destined exclusively to individual or collective projects of settled agrarian reform family farmers. Gross annual income of family farmers should be up to US$63.4 thousand. Financial support for both agricultural/livestock activities and non-agricultural/livestock activities carried out through direct employment of rural producer family labour. Non-agricultural and livestock activities envisaged: rural tourism, crafts, family agro-business and services compatible with the nature of rural activities and making the best use of family labour. 7,000,000,000 PRONAF Annual funding amounts - in US$ (1999-2008) 6,000,000,000 5,882,430,670 In US$ 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,184,835,662 1,185,917,644 1,000,000,000 931,447,874 4,658,753,086 3,876,150,395 3,125,792,191 2,095,629,014 1,458,752,632 813,523,848 0 Source: SFA/MDA 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Ano 14
Ministry of Agriculture, Livestock and Food Supplies Production and Agro-energy gy Secretariat Gerardo Fontelles Executive Secretary 15