The High Cost of Coffee

There is still an awful lot of coffee in Brazil, but there seem to be fewer and fewer customers for it. Since the 1920s, when Brazil supplied 80% of the world's coffee, the country's share of the market has steadily declined. While warehouses are bulging with beans, stevedores in Santos and other big coffee ports nowadays lounge about playing cards. This year Brazil will probably not be able to find buyers for its allotted export quota of 18 million bags, or 37% of the world market. The main problem: an inflexible policy of too-high coffee prices and official bungling and corruption. Last week Brazil an nounced new policy goals designed to stabilize prices and to put coffee exports on a more businesslike basis.

Juan's Challenge. Among world commodities, coffee ranks second only to petroleum in export value, and in Brazil it is the No. 1 cash crop. Part of Brazil's crisis, of course, may be only temporary: drought and forest fires caused considerable scare-buying and stockpiling abroad, followed by a sharp drop in demand. But by charging as high as $62.37 a bag (132 lbs.), Brazil is asking more than the world market will bear. Aggressive African and Central American producers are busy underselling it, and Colombia has benefited from a successful U.S. ad campaign that features a winning Colombian coffee grower named Juan Valdez, thus helping to erode Brazil's longtime image as the world's coffee king.

Exporters blame the trouble on the government's Brazilian Coffee Institute (I. B.C.), a complex clearinghouse that handles Brazil's coffee dealings. A recent official investigation uncovered a string of "irregularities" in I.B.C.'s hiring practices, promotional spending and coffee purchasing. The new president, appointed when the revolutionary government took over, is Leonidas Lopes Borio, 41, a civil engineer who is unfamiliar with coffee marketing.

At a meeting of the International Coffee Organization in London this month, Borio argued for considerably lower coffee quotas--the amount of coffee that producers are allowed to export--to help keep prices up by reducing the supply. Opposed by the U.S., the world's biggest coffee consumer, he wound up agreeing to a new world quota of 48 million bags--a scant 300,000 lower than the old quota. Angry at this failure, Brazilian producers also criticized Borio for selling 180,000 bags of low-grade coffee to Algeria and Lebanon at cut-rate prices.

Quotas in Question. Thanks to rising Brazilian prices, the U.S. housewife is now paying about 89-c- a b. for coffee, compared with 69-c- last year. Europeans, burdened also with high import duties on coffee, must pay even more--about $1.30 a -c-b. in London, $2 in Rome, $2.50 in Paris. Last week the U.S. Congress, never too happy with the system of quotas on world coffee, reacted in the consumer's behalf: by a narrow 194-to-183 vote, the House rejected legislation that would allow the U.S. to join in the new quota agreement. Though Administration leaders count on eventual approval, the action jolted Brazilians into asking President Humberto Castello Branco to convene an emergency meeting of all world coffee producers. The new quotas, argued Brazilian congressmen, are meaningless without U.S. participation.

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