Russian war in Ukraine is affecting coffee in Brazil
Jonas Ferraresso | March 23, 2022
Brazilian farmers must fertilize coffee fields to maintain plant health. All images courtesy of the author of the story Jonas Ferraresso.
Before delving into a technical analysis of the current conditions in the coffee sector in Brazil, I must first express my support for all the millions of innocent people whose lives have been affected by the Russian invasion of Ukraine.
It is clear that many of the issues we face in coffee compared to the humanitarian issues currently affecting the people of Ukraine. Sadly, this crisis has been accompanied by global inflation, an ongoing logistical crisis, weakened economies, the COVID-19 pandemic, climate emergencies, supply imbalances and much more.
Making accurate predictions about the coffee sector in such a chaotic global scenario is almost impossible, but I will nevertheless try to address some of the ways in which Russia's attack on Ukraine may be affecting the coffee sector in Brazil.
However, see the back of this story for links to various coffee industry efforts in support of Ukraine.
Coffee Tree Health
Virtually all living things depend on nutrients for their survival, and coffee is no exception. The main nutrients that coffee plants need are nitrogen, phosphorus and potassium (NPK). Calcium, magnesium, sulfur, boron, zinc and others are also important, but we'll stick with the first three.
The NPK complex performs essential functions within the coffee maker so that, at the end of an agricultural year, we have seeds that are viable for harvest and suitable for roasting. For example, potassium is related to the transport of sugars, as well as resistance to pests, diseases, cold and drought. A lack of this nutrient can cause leaf drop, bad fruit and seed development, and branch drying out.
A coffee plant showing poor seed development.
To maintain a productive and profitable coffee operation, potassium and other nutrients need to be in balance in the soil, a condition that often requires the application of soluble or organic fertilizers. Every time a farmer harvests a bag of coffee, some level of nutrient depletion occurs, so routine replacement of these nutrients is necessary.
The Fertilizer Crisis
Towards the end of 2021, Brazilian coffee producers began to feel a price increase related to the supply of fertilizers in the domestic market. This first wave of high prices was related to global inflation, increased post-pandemic demand and the possibility of Russian export sanctions as early as 2021.
This led coffee producers to spend a greater amount of money than they were expected to invest, but most did so. In some cases, smallholders had to reduce the required doses of fertilizers, replace soluble fertilizers with organic sources or, in some cases, not fertilize the soil correctly. The current conflict in Ukraine may be aggravating these conditions.
A nutrient-deficient coffee tree leaf.
The fertilizer sector in Brazil has changed considerably in the last 20 years, driven by a reduction of around 33% in national production, combined with a 400% increase in global demand. Dependence on fertilizer imports was around 20% in 2002, up from around 85% now, with Russia and Belarus accounting for around 26% of the volume needed by Brazilian agribusiness in general.
Returning to coffee and the example of potash, 80% of world production comes from mines in Russia, Belarus, China and Canada . Russia and Belarus have expressed their views on the logistical impossibility of exporting these raw materials to Brazil, while sanctions affecting Russian financial institutions and international SWIFT banking systems are, in some cases, making trade impossible.
Most large coffee farms will not be immediately affected by the disturbance, as much of the fertilizer supply has been purchased in advance. However, as stocks dwindle, shortages are more likely to affect small and medium-sized producers who rely on fertilizer dealers. Also, once the fertilizer supply returns, it is likely to come at a higher cost.
Coffee growers also have a little more time to prepare, as fertilization normally resumes in September, although shortages can affect supplementary crops, food crops and important economic crops such as wheat.
Exports and Markets
In the world coffee market, Ukraine and Russia are responsible for the consumption of 5.5 million bags, around 10% of the European consumption of 56 million bags, according to the latest data from the International Coffee Organization (ICO).
In addition to an anticipated reduction in consumption during the conflict, logistical and financial obstacles are also likely to arise.
Last year, Brazil exported around 40.2 million bags in total, according to CECAFE. Russia and Ukraine accounted for 3.5% of this export market, i.e. around 1.4 million bags, for around US$209 million in foreign exchange earnings .
Rows of healthy coffee trees.
Given these volumes, exporters, producers and traders are already feeling the impacts of the war in Ukraine.
For example, ABICS (Brazilian Association of the Soluble Coffee Industry) is already reporting that Brazilian coffee companies have not received money for some shipments to Russia. There is also concern about the suspension of container handling in Russia by Maersk, CMA CGM and MSC.
In Brazil, of course, any kind of uncertainty results in market speculation and subsequent price fluctuations. Despite the recovery this week, coffee prices hit a four-month low last week. For farmers, lower prices are likely to be hit by exponentially higher prices for fertilizers, as well as rising costs resulting from inflationary adjustments affecting gas and oil.
Unfortunately for producers hoping for a calmer year in 2022, after Russia's tumultuous invasion of Ukraine is adding a new layer of complications.
Jonas Leme Ferraresso has a degree in agronomy from the State University of São Paulo (UNESP). He worked as a coffee farmer and agronomist (Boa Esperança Coffee Farm), as a roaster (Artesan Coffee Solutions), as a cupper and roaster (Amparo Rural Union), and as a consultant. It is headquartered in Serra Negra, São Paulo, Brazil.