High costs and unfavorable weather

High costs and unfavorable weather: challenges for coffee and citrus producers


The economic scenario over the last years has brought challenges for the economic management of rural farms. In activities such as coffee and citrus, which require investments of at least two years to form the crop and a sharp use of workforce, the climate and inputs prices, mainly fertilizers, are major challenges.


The citrus production in Brazil is located in São Paulo state and a region called Triângulo Mineiro. As for arabica coffee, besides the areas that produce citrus, the production is also observed in the South, Cerrado, Matas de Minas Gerais, in the north of Paraná, some areas in Bahia and in the south of Espírito Santo, regions where the dry weather from mid-2020 up to recent months affected crops of both citrus and coffee.


The lower production, in turn, brings problems to the cash flow of the farms. Despite price rises for coffee and orange this year, the increase might not pay off the lower productivity, resulting in indebtedness, besides other costs, such as to replant. However, both citrus and coffee producers in regions that were less affected by the dry weather are able to take advantage of the higher prices and obtain better remuneration.


Concerning coffee crops, frosts in 2021 were another challenge for the sector. Areas that would register high production in 2022 had major losses, due to conditions after the frosts.


This situation takes place along with a critical economic scenario, in global terms, with difficulties of logistics and in the supply of raw material and the firm demand for both commodities and inputs, resulting in sharp price rises for both domestic and international quotes of fertilizers.


The production of coffee and orange depend significantly on nitrogen and potassium based fertilizers. These raw materials have been in the spotlight recently, since the supply of oil derived products, which are needed to produce nitrogen fertilizers, especially natural gas, has become scarce. Moreover, Russia, one of the biggest suppliers of nitrogen products to Brazil, announced in early November that it will limit exports from December 2021 to May 2022. Embargoes imposed to Belarus, a great potassium fertilizer exporter, have been limiting the global supply even more, boosting quotes.


In October 2021, urea was traded at circa 700 USD per ton at important ports in the world, significantly higher the value registered in the same month in 2020. As for potassium chloride, the average was 600 USD/ton, 1.6x higher in relation to October 2020. In São Paulo, the 20-00-20 fertilizer – which has averaged 2,150 BRL/ton, in real terms, over the last 10 years – averaged 4,000 BRL/ton in October/21.


Because of the sharp valuation of fertilizers, the purchase power of coffee and citrus growers against these inputs is worse than the average over the last 10 years. Cepea data indicate that, in October/21, coffee growers needed 3.25 60-kilo bags of arabica coffee to purchase one ton of the 20-00-20 fertilizer, against 2.8 bags on the average of the last 10 years. As for citrus growers, 138 40.8-kilo boxes were necessary to purchase one ton of fertilizer, against 90 boxes on the average of the last 10 years.


Now, producers are dealing with uncertainties for the coming months. Despite the return of rains in the Central-South, crops of both coffee and citrus are still in a recovery process, and many farms already have a weak cash flow, due to the lower production. Moreover, players fear the lack of important inputs.






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