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demand and supply of coffee in brazil
conclusion about brazilian coffee industry
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Brazil is known for having a very large biodiversity and having a huge portion of the Amazonian forest in its land. Yet, because of globalization, this country suffers a great deal environmentally wise and socially also. Both adults and children have to work in order to be able to survive. Many of these workers are exploited and changing this reality is quit hard. It all comes down to profits at the end: exploiting workers is much cheaper than paying them properly. At least, there are some people who are actually putting some effort on solving this problem. This is where the issue involving coffee in Brazil comes in. The actors involved in this product are either greatly benefited or exploited and the working conditions for the farmers are quit terrible. However, there are solutions that were proposed in order to protect the coffee growers such as fair trade. It is then understood that coffee production in Brazil has negative effects on coffee laborers, but to a lesser extent on those who work in the fair trade business.
The Actors
First of all, when it comes down to the actors, we mainly see three: The industries, the government and the farmers. There are many industries that buy their coffee beans from Brazil. It goes from small companies to big corporations like Nestle, Starbucks, Kraft, Sara Lee, Tim Hortons, etc. The big corporations always try to project an image of how nice they are to the producers by showing pictures of happy farmers. They try so hard to seem like they’re doing the right thing, yet, in reality, it’s the complete opposite. A good example of the issue would be to look at Nescafe, which is one of the branches owned by Nestle. According to a website called Forbes, Nescafe r...
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...or them to pay back the debt, they have to pull out money from the coffee farmers’ salary, which means farmers aren’t exactly paid the Fair-trade Minimum Price which is US$126/quintal. Coffee growers end up with US$40-85/quintal depending on how large the debt is. It is then seen that fair-trade is not the perfect solution for these poor people, yet it is better than nothing.
Although Fair trade has been presented as a solution to the exploitation of coffee laborers, it isn’t a perfect solution. Though, it is clear that its advantages outweigh its disadvantages when the suffering of the other farmers is seen. Even after those laborers were freed of slavery, they weren’t exactly treated much differently. If this is what is happening to the laborers of this commodity, what is happening to those forced to work in the industry of sugar, petroleum, tea, etc?
The setting for Stanley J. Stein's book Vassouras takes place in one of the most unique environments in the world. Housing large tracts of virgin rain forest, Vassouras represents the ideal climate for the coffee cultivation that has come to dominate Brazilian agriculture, and during the latter half of the 19th century proved as the foremost region for coffee growing in the world. However, by the beginning of the 20th century, Vassouras had declined as a major coffee producing region, and its decline demonstrates important aspects of Brazilian cultural and economic life. Vassouras ultimately lost its affluence as a coffee producer because of the destructive and ineffective agricultural practices of its farmers and the crumbling of the slave-based society that served as its dominant labor force. The experience of Vassouras also demonstrates larger themes in Latin American economics at the end of the 19th century.
This reality is a reflection of the inequality in income distribution in the production and marketing of cocoa-based products, where 70% of the final price of the product is received by transnational companies and the industry, while producers receive only 5% of final prices. This often does not even get the farmers to cover the costs of production. Additionally this means that the market structure leaves producers with little ability to make decisions and unlikely to actively participate in the definition of international economic rules. For this reason they are forced to produce at low cost, which affects the working conditions of farmers.
As discussed in class, when demand decreases for a product, companies or in this case producers should exit the market. But when it comes to coffee, producers don’t want to exit the market because the costs of moving out of coffee production are quiet large and farmers don’t have the means for alternatives. The reason being that, farmers don’t have any outside funding to promote efficient diversification and development. Another reason is that there are protection policies from the United States and the European Union that have made it harder for framers to benefit from producing other crops. And yet, the opportunity cost for farmers to switch to another product is higher than the cost of coffee in a low profit market. So, this book discusses different strategies that are being used to help producers get a better advantage to provide a living for their families. Different strategies being used include shade-grown coffee, differentiation of products, organic coffe...
The Wall Street Journal, Boston Globe , and the Economist as well as many other media outlets of record were all in consensus when they declared the onset of coffee crisis in October 2001; farmgate prices had sharply dropped reaching a thirty-year low of $0.39 per pound in This price was below the cost of coffee production at the time, listed at USD 0.60 per pound.(Economist 2001) Price declines are not such an uncommon occurrence, but what is more troubling is that the cash market for coffee suffers from high price volatility. For a more detailed look please see Appendix 1: Cash Price Variation. Coffee producers , who are mainly located in developing countries , are highly vulnerable to price risk in the cash market , yet their profits in relation to their risk exposure has been steadily declining. In a 2001 study conducted by the European Fair Trade Association (EFTA)- an organization that promotes the sale of products that ensure price security for marginalized commodity producers- the general finding was a declining share of trade revenues from coffee remained in the coffee producing countries. Although the international coffee market has grown from $30 billion annually in the 1980s to $55 billion in 2001, in aggregate coffee producers have seen their share drop from $10 billion to $7 billion in 2001 (Renkema 59).
...-operative handling distribution of coffee (Kolk 2013:327-28). Fair trade also allows consumers to consider the type of product being purchased by informing them of the fair and ethical practices behind the coffee beans (Kolk 2013:334). By supporting fair trade coffee the consumer can feel a sense of contribution in supporting the farmers’ livelihood.
An article in the Seattle Post, describes the alliance that Starbucks is making to ensure that a sustainable supply of high quality of coffee is produce in Latin America. "Starbucks President and CEO Orin Smith said the alliance is partly his company's effort to pass on the "high price" of a cup of coffee to farmers." (Lee, 2004). He states that the high price enables them to pay the highest price to the farmers. Though the high prices to suppliers can demonstrate that money get to farmers with being diverted. Starbucks overall goal with this alliance is to buy 60 percent of its coffee under the standards agreed upon by 2007. "The agreement reflects the growing power of the premium coffee market and efforts to exploit it for the benefit of small farmers" (Lee, 2004).
Brazil’s economy was extremely dependent upon only one product, in broad contrast with the US, who depended on many different products. Brazil was dependent upon coffee, the sales and exports, for up to 70% of their economy. This was extremely problematic, because if tariffs and sales taxes on imported goods in other countries increased, Brazil was extremely screwed. And those tariffs and sales taxes did increase. They increased enough that in 1931, Brazil was selling their coffee for 8 cents a pound, whereas in 1929 they had been selling it for 22.5 cents a pound. Brazil had hoped that their valorization program would continue to work here. The valorization program was a program where the Brazilian government bought and stored coffee during times when there was no demand. When the demand went back up, the coffee was sold again. This worked well after WWI, but during the Great Depression it failed, mainly due to an almost circular problem. The government bought coffee and stored it when demand was low, they had to borrow money from the US and other countries to raise the funds to buy the coffee from planters, but demand was low and the US stopped approving loans due to not seeing coffee as a safe business opportunity, causing the government to not be able to afford to buy the coffee. This is a huge reason that Brazil fell into the Great Depression. They couldn’t buy things, they couldn’t get loans, and they most certainly could not sell
When it comes to Brazil’s comparative advantage there is a couple of key benefits. first , they have a sufficient amount of water, soil, and sunshine. Leaving production cost low, making them a preeminent player in agricultural products such as beef, coffee, poultry, soybeans, and sugar. Also, in 2011 it started imposing tariffs on shoes, chemicals, textiles, and barbie dolls. This would only generate more money being bought back into brazil’s economy with the imposed extra charge on goods.
Brazil has the 7th largest economy by nominal GDP in the world and also 7th largest by purchasing power parity. It is moderately open to free markets and is one of the fastest growing economies in the world with an annual GDP growth rate of 5%. Brazil is closing the competitiveness gap with India and China among the BRIC economies. The major components of GDP of Brazil are: service sector (68.1% of GDP), industrial sector (26.5 % of GDP) and agriculture (5.5% of GDP). Various industries include textiles, shoes, chemicals, lumber, iron ore, tin, steel, machinery and equipments. Coffee is the major product of agriculture; other agricultural produce include soybeans, wheat, rice, corn, sugarcane, cocoa, etc. Touris...
There are three components for the coffee industry which is composed of the suppliers or the farmers, the manufactures or the producers and the consumers or the drinkers. All three of these components of the industry are fighting each other to make the most profit and salary, while also spending the least amount of money. This causes problems when the workers are demanding higher wages which will result in higher cost of production and lead to higher coffee costs. On the other side of the equation the consumers want their coffee to cost less and less for them, which is making workers work harder and for less money. All the arguing between these three aspects of the industry eventually results in a price which makes all the aspects of it happy, although each wants more the benefit them.
Mauricio Font, a sociologist, depicts in his novel a detailed study of São Paulo’s coffee plantations in the 1920s, in an attempt to evaluate the impacts of coffee on Brazilian society. Part one, subsection 4, “Coffee and Industrialization,” was relevant to my research because this section of his novel is where he explicitly rejects previous scholar’s theories that coffee caused underdevelopment in Brazil. Instead, he agrees that “internal factors in São Paulo’s export system helped to form a dynamic process of social and economic diversification, which resulted in a more capitalist competitive market.” He cites how coffee estates were not fully capitalist programs early on, however, planters were able to establish contracts with immigrant
Agriculture is one of the most important sectors in Brazilian economy, accounting for 22 % of the country’s GDP. Brazil is one of the few countries that is self-sufficient in basic food crops and is a leading exporter of sugar, coffee, orange juice, soybean, beef, tobacco, ethanol in the world. About one-third of the world’s oranges are grown in Brazil - more than twice the amount produced in the United States, which is the world’s second largest supplier. That means, Brazil is very important globally as a source of food security and environmental sustainability; it contains 13.5 % of the world’s potential arable land and 15.2 % of the world’s renewable water resources. 1
The movement particularly emphasizes on exports from developing countries to developed countries, with products such as handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit, chocolate, flowers and gold. Moreover, coffee is one of the most widely traded goods in the world. For many developing countries, coffee trade is an important source of income. Producers can provide a better trading and improve terms of trade. Moreover, this allows producers to improve workers’ living environment and future life in general (De Pelsmacker, Driessen and Rayp, 2005).
When comes to Economic aspect, coffee is the second most traded product in the world after petroleum. As the country’s economy is dependent on agriculture, which accounts for about 45 percent of the GDP, 90 percent of exports and 80 percent of total employment, coffee is one of the most important commodities to the Ethiopian economy. It has always been the country’s most important cash crop and largest export commodity. (Zelalem Tesera p
Two common products that are Fair Trade Certified are Cocoa and Coffee, each of which contains problems that producers face but gain benefits from Fair Trade. Fairtrade International states that cocoa is grown in tropical regions of more than 30 developing countries, such as West Africa and Latin America, providing an estimate of 14 million people with livelihood. Fair Trade Standards for cocoa includes no forced labor of any kind - including child labor and environmental standards restricts the use of chemicals and encourage sustainability. A problem cocoa producers face is the lack of access to markets and financing. Since cocoa is a seasonal crop, producers need loans to meet the needs for planting and cultivating their crop. With this in mind,...