Coffee Price Surge Boosts Brazilian Land

As New York’s Commodity online has recently reported, the recent coffee price surge has done nothing to dampen the world’s taste for Brazilian coffee, with exports to Arab nations jumping 44% in monetary terms month-on-month, reaching $20 million for March alone.  Total exports for this quarter are 36% more than Q1 2010, garnering $58.9 million.

Rising prices are being driven by a global taste for coffee, as booming markets like India and China view coffee as a western luxury and switch from tea.  As the world’s largest producer of coffee, Brazil is well-placed to gain from this development, particularly as it has started to diversify away from its staple Arabica beans towards Robusta coffee, exports of which quadrupled to 183,421 bags in March.

Furthermore, with adverse weather predicted to reduce Colombia’s coffee crop, Brazilian exports are set to be in even greater demand.  Colombia is the world’s second-largest producer of washed Arabica beans after Brazil.

Coffee growth boosts security of Brazilian land

Brazilian agricultural land promises a sound investment, as despite these promising developments in the coffee market, Brazilian coffee output is actually declining.  According to the country’s agriculture ministry, 2011’s output will be a full 13% smaller than 2010’s.

With coffee prices soaring, Brazilian agricultural land is the ideal way for overseas investors to tap into Brazil’s growth.  Foreign investors possess the same rights as domestic buyers, and the Brazilian government is actively seeking to encourag foreign investment.

Brazil’s swathes of rural farmland in regions such as Bahia – already accounting for 30% of GDP – offer an attractive long-term investment opportunity.  Agrifirma Brazil, a UK farm fund backed by Lord Rothschild, has embraced under-valued regions.  In April 2010, the Financial Times highlighted regional growth, claiming that ‘western Bahia has also attracted interest from foreign investors… “today, without a doubt, Bahia is better positioned because of the quality of land and logistics”’ (FT, 15/04/10) according to an Agrifirma spokesman.

Furthermore, agricultural land investments in fast-growing  rural regions such as Bahia reduces the risk of being caught up in the urban property bubble which may be developing in the southern Brazilian cities of Rio de Janiero and Sao Paolo.  As Dan Freeman, the managing director of a British-backed Brazilian property company, Brazil Bahia Property, notes, ‘rural areas such as Bahia are still massively under-valued, yet their huge agricultural and industrial potential is ripe for development.’

Brazil’s land promises even more growth

Brazil boosts the most under-utilised farmland in the world, more than twice as much as America and Russia combined, according to the UN’s Food and Agriculture Organisation.

This farmland is savannah – rigorous environmental protections ensuring that the pristine Amazonian rainforest will remain untouched – and so can be utilised without environmental or ethical concerns.

Brazil’s strength lies in its land,  replete with raw materials, oil and agricultural promise – the mighty Amazon river boasts the world’s largest reserves of fresh water. These resources are powering an economic growth of 7.5%.

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