Heavy Frosts Hurt Brazil's Smaller Coffee Farmers

MARYANNE MADON looks dejectedly at two parallel rows of coffee trees, one flourishing, the other destroyed by Brazil's recent frosts.

More than 70 percent of her family's coffee crop was wiped out in two successive frosts in June and July, the worst here in 20 years. Her family's farm lies just outside Campinas, a city 50 miles northwest of Sao Paulo.

But unlike some smaller farmers, her family has no intention of getting out of the coffee business. ``We will surely replant,'' she says. ``Coffee prices are at an all-time high.''

Third of crop destroyed

Ironically, the frost that has destroyed next year's crop has led commodities traders to bid up current prices. The frost destroyed an estimated 25 percent to 35 percent of next year's crop, although accurate assessments will not be available for another two months. Such gyrations in the weather and the commodities market would have shaken Brazil to its roots 30 years ago. But coffee now only accounts for 3 percent of the country's exports. The frost has not caused any financial crisis, a sign of Brazil's increasingly diversified agriculture.

As recently as the 1960s, coffee accounted for 50 percent of Brazil's exports. But since then, products such as orange juice and soybeans have surpassed coffee.

As Brazil's economy developed and agricultural unions gained strength, the labor-intensive coffee crop became less profitable for many medium-sized and large farmers. They planted crops that could be harvested by machine or with fewer laborers.

``Farmers simply can make more money with oranges or cotton,'' says Andre Nogueira, an agronomist for the Regional Agricultural Co-op of Campians. He says the freeze will drive some small coffee farmers out of business, while others migrate to warmer coffee-growing regions. But most of the bigger growers who have traditionally grown coffee will continue, he says, because they will make big profits on the coffee already harvested.

``Coffee sold for $120 for a 60-kilogram [132 lb.] sack before the freeze,'' Mr. Nogueira says. ``Now they are getting $190 to $200 for the same coffee.''

But farmers with less financial resources are considering other options. Replanted trees take three years to mature, and some farmers simply cannot afford to wait that long. Distilleries offer cash in advance to farmers who will switch to sugar cane, the basic ingredient of the Brazilian rum known as aguardiente. Cane is also used to produce gasohol, a blend of gasoline and alcohol widely used in Brazilian cars.

``Many of our members are seriously considering the offers,'' to plant cane, says Marcio de Freitas, president of an agricultural co-op in Sao Paulo state. Sugar cane and orange groves have slowly taken over the coffee fields here. Sao Paulo was once Brazil's largest coffee-producing state but has now dropped to third place.

Coffee prices double

While coffee production has slowly declined over the years, domestic prices have remained relatively stable. Yet prices have doubled in the past two months. Coffee, considered a food staple here, has jumped to $4.50 a pound in supermarkets - about 8 percent of the monthly minimum wage. As a result, domestic consumption has dropped 30 percent to 35 percent, according to Francisco Arantes, chairman of the Coffee Chamber at the Sao Paulo commodities exchange.

Part of the price increase stems from the frost, Mr. Arantes says, but another part comes from the government's economic stabilization plan, which drastically increased the cost of consumer goods. Prices of everything from bread to gasoline increased, causing great hardship for low-income people.

The government recently began to sell off its accumulated stores of coffee in an effort to lower prices. It has sold 1.9 million sacks in six auctions since May. The coffee was often stored improperly, however, so some is moldy or of poor quality.

Nevertheless, the National Coffee Council opposes the sell-off, fearing it will lower the prices too much for farmers. But coffee futures traders support the government sales, Arantes says, because they hope lower prices will stabilize the market.

``Right now coffee prices are unnaturally high,'' Arantes says. ``That's not in anyone's long-term interests.''

International coffee prices have risen along with each new rumor about the impact of the Brazilian frosts. Coffee shot from 77 cents a pound in January to $2.19 in late July. Some traders predicted prices would top $3.

But Arantes says Brazilian and international coffee prices have peaked and will begin to decline later this year. The loss due to the frost will be much less than the 50 percent predicted, he adds.

Coffee farmer Ms. Madon says she also hopes coffee prices remain stable, giving her family enough time to recoup its losses.

``We will plant coffee again,'' she says, ``because we always have.''