Experts from Brazil say coffee production could be expanded.
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And instead of trying to prop up prices using intervention schemes, as Brazil and other coffee producers have been doing recently, low prices should be seen as an ally: eventually they will drive out inefficient producers elsewhere, and Brazil will be able to increase its earnings through greater volumes.
Upon what Brazil might have done to maximise coffee revenues when it supplied most of the world.
For the past three decades, sugarcane plantations have been spreading north and west across Brazil's hinterlands, replacing coffee, citrus and pasture.
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The slide started recently when Brazil, the world's biggest coffee exporter, greatly stepped up production, mainly of cheaper grade coffee.
Brazil is the world's largest coffee producer and exporter, and this study contends that up to a fifth of coffee production will be used to produce biodiesel.
Currently, Brazil is famous for two things: coffee and ethanol.
It doesn't have to import the bulk of its food, and when demand for agricultural commodities rises as incomes rise, Brazil is ready as the world's leading sugar, coffee, beef and chicken exporter.
The last crop out of Brazil, the supplier of more than one-third of the world's coffee, was a relatively small one.
When it comes to production, coffee comes from nearly 80 countries on this planet, but most comes from Brazil, Vietnam, Indonesia, Colombia, Ethiopia, Guatemala, Mexico, and Honduras.
When you add the Brazil situation to the recently announce Ethiopia settlement that now has Starbucks paying additional royalties for coffee from that country, Starbucks is now facing an onslaught of input price increases with not much wiggle room on the revenue side.
Among them: difficulty splitting the sales teams in Canada, pricing coffee and chocolate too high in Russia and failing to anticipate a gum slowdown in Brazil and therefore shipping too much inventory.
The case for buying now begins with knowing that, as the U.S. and the global economies recover, emerging markets like Mexico and Brazil will benefit because commodity prices rebound early in a recovery and these countries are commodity exporters (oil, coffee and iron).
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