The geographic distribution of coffee production, and the varieties of coffee produced, have changed throughout Brazil the years. These developments are associated with structural changes resulting from reductions in government intervention and its effects on prices in the coffee market, which has established a new dynamic of coffee production in the country. Regionss such as Paraná and São Paulo, historically important coffee producers, declined in importance, leaving only a few micro-regions in these states specialized in coffee production. During the 2014/15 biennium, 80% of the coffee-specialized micro-regions were concentrated in the states of Minas Gerais, Bahia, Rondônia, and Espírito Santo. Minas Gerais and Bahia primarily produced arabica coffee, while Rondônia specialized in robusta coffee. Overall, coffee produced in Brazil improved in quality and value-added over this period.
Brazil is the largest producer and exporter of coffee in the world. According to data from the Municipal Agricultural Survey (PAM), published by the Brazilian Institute of Geography and Statistics (IBGE), approximately 50.3 million sixty-kilogram bags of coffee were collected in Brazil during the 2016 harvest, with 42.5 million of these bags containing arabica coffee and 7.8 million containing robusta coffee. Based on data from the Ministry of Industry, International Commerce, and Services, the revenue generated from coffee exports in 2016 totaled US$ 4.84 billion, and primary export destinations included Germany, the United States, Italy, and Japan.
Coffee cultivation has evolved in significant ways throughout the course of Brazil’s historical and economic development, especially in terms of location of production. The coffee cultivation in Brazil began in the Northern region–state of Pará–in the 18th Century, and later shifted toward the states of Rio de Janeiro and São Paulo (along Vale do Paraíba). Around 1850, cultivation spread rapidly toward the Serra da Mantiqueira and Santos. Later, in the 20th Century, coffee cultivation continued its expansion into the states of São Paulo and southern Minas Gerais, Espírito Santo, Paraná, and even into Brazil’s Northern region, in the state of Rondônia. Throughout this expansionary period, the Brazilian economy as a whole was tightly coupled with the coffee economy, and the coffee market was highly regulated by the Brazilian federal government until the mid-1990s.
The Brazilian Coffee Institute had played a major role in manipulating the world coffee price between 1952 – 1989 by acquiring and stockpiling high quantity of coffee production with the aim of regulating supply and demand causing fluctuations in favor of Brazilian coffee producers. IBC, an authority under the Ministry of Industry, International Commerce and Services used its powerful position as the top coffee producer in the world. In its price regulation scheme, IBC supplied lower grade beans for the domestic market while setting beans that could be priced higher price for export. The breakdown of the international coffee agreement in 1989 associated with the dissolution of the IBC in 1990 brought these regulatory policies to an end. The deregulation of the sector brought prices lower causing coffee growers with lower annual income. Without government intervention, the coffee free market reinvented itself in the country to remain competitive. Coffee production systems were modernized and began to adopt increasingly innovative production techniques in the race to improve competitivity through differentiation in product quality, cost reductions, and even the creation of internal management mechanisms within firms, all with the goal of achieving client satisfaction and confidence.
Part of the restructuring of the coffee industry was to introduce coffee production to new regions where climatically suitable for better yield. Coffee producers were also involved in niche consumer markets by adding values to their product in specialty coffees with seals of quality and geographical certifications.
Since 1990, the government of Brazil gave priority to boost grain production by less prioritize to coffee sector due to the fact Brazil’s economy was transformed to a higher GDP. New coffee regions which are not fit to be used for commercial scale grain production became attractive for new plantation.
The transformation from old government controlled system to the free market driven structure brought a growth with increases from 1995-2000 of approximately 100% in production and 20% in harvested area, after which these figures then changed to fall sharply until 2003. The 38% fall in production between 2000 - 2003 was mainly caused by the fall in prices due to U.S. dollar drastic fluctuation against the peso. In 1999, a bag of arabica coffee cost on average US$ 144.5 on the Brazilian market, while in 2002 a bag of the same variety cost US$85.5. The other reason for the sharp price plunge was the inflated stockpiles of coffee in consumer countries.
Follwing the dismantling of the IBC, Brazil became exposed to the influence of futures markets in the determination of domestic coffee prices, which on one hand offered greater security to agents involved in the commercialization of coffee, and on the other hand, it resulted in coffee price instability that generated substantial insecurity among producers.
In general, robusta coffee exhibited lower prices compared to arabica coffee]. Nonetheless, between 2004 and 2016, both arabica and robusta varieties exhibited growth tendencies. In 2016, as a result of a fall in robusta production due to a drought in the state of Espírito Santo (robusta production levels were 27.7% lower in 2016 than in 2015), the price of robusta coffee reached prices nearly as high as those of arabica. Increasingly, inclusion of robusta beans in gourmet coffee blends has increased their exposure in Brazil, as well as in exports.
As a result, specialized area is a kind of strategy to gain competitiveness and economies of scale as a response for prices. In an unregulated market with high level of competition the strategies of quality and differentiation have played a pivotal role in aggregating value.
Brazilian coffee production has experienced important changes driven by new consumer markets that are increasingly focused on production processes and product quality. There is strong growth in segments of the consumer coffee market that demand greater transparency and information for the consumer, which in turn has allowed geographical certification to add increasing value to final products. Likewise, coffee that is sold without accompanying geographic labeling tends to be considered of inferior quality in the market, while products that offer greater information are considered to be of higher quality. In response to these changing preferences, organizations such as the Brazilian Specialty Coffee Association (BSCA), and programs such as the Seal of Purity and Quality Program (PQC), the Sustainable Coffees of Brazil Program, and the Common Code for the Coffee Community (4C) support producers’ attempts to obtain certifications and recognitions for their products.
Based on the identification of micro-regions specialized in coffee production, it is possible to observe their respective levels of development, and thereby verify which still require more resources and technical support in order to improve their production and guarantee their ability to supply the market with quality, valuable products. These factors are important for the broader development and sustainability of the coffee production chain in Brazil.
Although there has not been an increase in the number of specialized micro-regions in Brazil over this period, there have been important transformations in the spatial distribution of coffee production in the country. The states of Paraná and São Paulo, which in the past were the major national producers of this commodity, collectively accounted for only 12.12% of national production during the 2014/15 biennium. Specialized micro-regions have increasingly become concentrated in four states: Minas Gerais, Espírito Santo, Bahia, and Rondônia. Together, these four states hosted approximately 80% of the specialized micro-regions, and represented 82% of total production in the country in 2014/15. In other words, the primary producing states were those that concentrated the greatest number of specialized micro-regions.
The micro-regions specialized in arabica production are predominantly concentrated in the Cerrado region of the Southeast and the state of Bahia. The state of Minas Gerais exhibited the largest number of micro-regions specialized in arabica (60%), and arabica coffee accounted for 75.4% of total coffee production, and 81.4% of GVP from coffee production in this state. These numbers highlight the importance of Minas Gerais and the Cerrado region within the coffee economy of Brazil. These regions host modern, high-productivity coffee production, favorable landscapes, and extensive use of irrigation and mechanization.
Micro-regions specialized in robusta coffee are primarily concentrated in the states of Espírito Santo and Rondônia. The state of Espírito Santo is the largest producer of this species, accounting for 54.2% of all robusta-specialized micro-regions in Brazil. Espírito Santo stands out for its ideal temperature conditions–nearly the entire territory of the state is amenable to robusta coffee cultivation.
In the 2014/15 biennium, robusta cultivation was present in all of the micro-regions of Espírito Santo, and occupied an area of approximately 290,000 hectares, which constitutes 65% of all area dedicated to coffee production in the state. A further 25% of micro-regions specializing in robusta production were located in the state of Rondônia in 2014/15. The robusta coffee cultivation in low-altitude, high-temperature areas, such as Rondônia, has expanded rapidly in recent decades, and served as the primary source of income for 38,000 small farming households in 2014/15. These numbers reveal the important role played by coffee production in Rondônia’s rural economy.
The majority of the micro-regions in Minas Gerais, as well as some in São Paulo and Espírito Santo, are strongly associated with variables related to arabica, while the micro-regions of Espírito Santo and Rondônia are more strongly associated with variables related to robusta.
Analysis of Brazil’s agricultural development over the course of the 20th and 21st Centuries reveals that the country transitioned from traditional agriculture, characterized by low capital-intensity, to more highly-developed, technology intensive production. This broader process of development has been driven by transformations along diverse agricultural production chains, including that of coffee. Brazilian coffee production, while heterogeneous, has achieved increases in quality even while adapting to structural transformations resulting from the dismantling of government intervention in the sector. Coffee producers are increasingly focused on satisfying evolving consumer preferences, seeking certifications, geographical differentiation, and quality seals for their products. Together, these elements express the constantly evolving dynamics of coffee production in Brazil.