Public policies and the financing of coffee production in ... · 1 Public policies and the...
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Public policies and the financingof coffee production in Brazil
International Coffee Organization - ICO
London, 21 September 2010
The Coffee Agroindustrial Systemin Brazil - Overview
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• Number of establishments:287,000 in 1,850 municipalities;
‘Cafés do Brasil’
, , p ;
• 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
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Distribution of Arabica and Robusta coffees in Brazil
Brazil: establishments with more than 50 Arabica and Robusta coffee trees as at 31.12.2006.
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
HectaresNº of establishments Area planted (ha) Production
0 a 10
10 a 20
20 a 50
50 a 100
> 100
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
Undeclared
Total
Coffee: Changes in volume of Brazilian crop(Conab, 2010)
18.9
34.027.2
31.1 31.3
48.5
28.8
39.232.9
42.536.1
45.939.4
47.3
0.0
10.0
20.030.0
40.0
50.0
60.0
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Brazil: Changes in area planted to coffee
(in million hectares)
2.8
2.92.9
3.1
2.7
2.5
2.3
2.1
1.9 1.92.0
2.22.3
2.2 2.2 2.2 2.2 2.2 2.2
1.9
2.4
2.4
1.7
1.9
2.1
2.3
2.5
2.7
1.5
Area - in million hectaresSource: Conab, 2009
Coffee: Annual changes in volume of Brazilian exports and export earnings
30.0
35.0
4.0
4.5
5.0
0.0
5.0
10.0
15.0
20.0
25.0
volu
me
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
earn
ing
s
Source: Mdic, 2009
Volume in millions of 60-kg bags Earnings - in billion US$
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Rural Credit. Amount of credit granted – in billion US$(Bacen, 2010)
44.13
4045
50
16.0919.78
22.2725.44
32.07
1015
2025
3035
40
-5
10
2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010
LEADING BRAZILIAN AGRICULTURAL PRODUCTSGROSS VALUE OF PRODUCTION
(APRIL 2010 PRICES)
Pork3.23%
Beans1.81% Rice
2.99%
Coffee5.35%
f
Others17.56%
5.35%Poultry8.91%
Milk7.87%
Maize6.13%
Beef17.35%
Source: CNA
Sugar cane11.6%
Soybean17.54%
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Share of coffee in Brazilian crop production – 2010(in thousand tonnes)
Others*816
Wheat5,369
Rice11,320
Beans3,305
Coffee2,793
Maize54,797
Soybean68,674
Source: LSPA/IBGE, Sept/2010Preparation: AGE/MAPA
Percentage share of coffee in Brazilian crop production - 2010(in %)
Others*1%
Wheat4%
Rice8%
Beans
Coffee2%
Maize37%
Soybean
46%
2%
Source: LSPA/IBGE, Sept/2010Preparation: AGE/MAPA/
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Cafés do Brasil – Sources of production financing
Main CR sources:
Compulsory resources RO financial institutions must invest 25%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 bekept in investment by financial institutions;
Official Credit Operations – OOC – resources supervised by the MF;Free Resources – owned by the financial institutions, invested atmarket 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;• 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 and soluble coffeepp p g g g
industries;
• promotion and advertising in internal and external markets.
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Treasury resources: 0.55%
FUNCAFE: 2.23%
Other sources: 4.37%
Financing granted to producers and cooperativesby source of funds - 2009
Compulsory funding: 48.30%
Rural savings: 26.05%
Free resources: 4.20%
Constitutional funds 7.27%
BNDES/FINAME: 7.02%
Financing granted to producers and cooperativesby source of funds - 2010
Other sources: 3.75%
FUNCAFE: 1 74%
Compulsory funding
51.29%
Free resources: 2.22%
Constitutional funds7.66%
BNDES/FINAME: 7.82%
Treasury resources 0.19%
FUNCAFE: 1.74%
Rural savings: 25.32%
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Source: BACEN – Preparation: SPA/DEAGRI/CGAE
CottonOthers
RURAL CREDIT – Marketing arrangements (2009)by crop
8% Rice15%
Coffee13%
Sugar cane9%
Maize20%
Soybean3%
Wheat14%
Others18%
Source: BACEN – Preparation: SPA/DEAGRI/CGAE
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Coffee Economy Defence Fund (Funcafé)
Funcafé: Lines of credit. Basic conditions
• Budget 2010 – funding lines: US$1.5 billion
• Operational risks for funding institutions
• Financial charges: 6.75% p.a. (not applicable to all sources of rural credit).
Repayments to funding institutions: 4.5% p.a.
Repayments to the Fund: 2.25%
• Lines of credit and beneficiaries:
Costing, harvesting and warehousing - rural producers, producer cooperatives
Financing for coffee purchasing – FAC - roasters, processors and exporters
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Funcafé – annual amount of funding resources passed on to financial agents2001-2009
1,193,390,6521,200,000,000
1,400,000,000
301,824,141
135,496,865
280,775,600
512,900,827
809,580,822863,896,867
825,491,031
49 778 761200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
In U
S$
49,778,761
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
AnoSource: 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.’
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Funcafé – financing costsof 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.’
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Funcafé – Coffee purchasing by the domestic agro-industry – FAC
• To finance purchasing of green coffee byroasters, processors and exporters.
• Objectives of this line ofcredit:
• Prices paid for coffee purchased in theseoperations, must be equal to or higher than theminimum 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
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National Programme for Strengthening Family Agriculture (PRONAF)
• Resources destined exclusively to individual or collective projects of settledagrarian reform family farmers.
• Gross annual income of family farmers should be up to US$63.4 thousand.
• Financial support for both agricultural/livestock activities and non-agricultural/livestock activities carried out through direct employmentof rural producer family labourof rural producer family labour.
• Non-agricultural and livestock activities envisaged: rural tourism, crafts,family agro-business and services compatible with the nature of ruralactivities and making the best use of family labour.
PRONAF – Annual funding amounts - in US$
(1999 - 2008)
5,882,430,6706,000,000,000
7,000,000,000
1,458,752,632
2,095,629,014
3,125,792,191
3,876,150,395
4,658,753,086
1,185,917,644931,447,874
1,184,835,662
813,523,8481,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
In U
S$
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
AnoSource: SFA/MDA