José Marcos Magalhães, President of Minasul, one of the largest coffee cooperatives in the world and the second largest in Brazil, has reported record export volumes of coffee in March and expects the trend to continue despite the worldwide threat of COVID-19.
“It’s important for the market to be calm about coffee volumes. Supply and demand are well balanced at the moment. There is a small deficit of coffee, in fact. We expect a good harvest of good quality, exporting processes are in place, and the ports are working,” says Magalhães.
“In March, we exported 65,517 [60-kilogram] bags. [At the time of the interview] we had 55,000 bags booked for export in April, including 5000 bags going to Trieste in Italy.”
Magalhães says the increase in demand by 25 per cent is coming from the United States, the United Kingdom, and eastern Europe. The desire for coffee drinking hasn’t stopped, with rising home consumption levels compensating for the temporary closure of coffee shops.
Minasul has also experienced record revenue and profitability results for 2019. The cooperative received and processed 1.87 million bags of coffee, boosting net revenue by 29 per cent to BRL$1.44 billion (about US$257 million), and increased exports to 70 per cent. It also added a further 13 per cent in active members totalling 6700, and increased net profit by 42 per cent to BRL$20 million (about USD$4 million).
“It was a record year for Minasul despite the challenges of 2019 and the coffee price crisis. Results from our strategy of taking quality coffee from the south of Minas Gerais state to the rest of the world surprised and showed us that we are on the right path,” says Magalhães. “We are going to focus on diversification, technology, and increasing our position overseas in 2020.”
The total level of coffee stocks at the end of 2019, however, totalled BRL$166.3 million (about US$33.26 million), reaching their lowest level in 10 years. This was the equivalent of 415,579 60-kilogram bags. At the end of 2018, the stock totalled 600,021 bags.
“Last year’s harvest was lower than expected, but there was growth in demand and that is very positive. It shows us that there is room to grow,” says Magalhães.
He expects this year’s harvest to be 5 per cent lower than 2018’s harvest, in our region, and already has his focus on 2021, a biannual harvest year in which stocks will be low. “This is worrying. I don’t pass these numbers on fleetingly,” says Magalhães, a member of Brazil’s Coffee Exports Council.
In preparation for such events, the cooperative has presented a new strategic plan for this decade, focusing on new business, innovating, increasing the number of services to cooperative members, providing greater access to the international market, and diversifying its focus into grains such as soy, which hit record high prices in March.
“Most producers aren’t just growing coffee. They need an income source at all stages throughout the year, and our goal is to help them with all their needs. It’s important to have diversification,” Magalhães says.
Minasul also plans on growing its presence in agroindustry by producing proteins, cereals, and fruit juices.
Minasul is in the process of launching its own ‘coffee coin’ for producers to purchase items based on the volume of coffee produced from harvest. With one kilogram of coffee equating to one coffee coin, Magalhães says the incentive will enable producers to transfer ‘coffee coin’ into much-needed items such as pesticides, fertilisers, machinery, equipment, hats, white-lined products like fridges, and the ultimate goal of a car.
“We are putting the New York Stock Exchange into the pockets of the producer. They get the purchasing power because their currency is coffee stock, which they can control by the kilogram. They don’t need to use one [60-kilogram] bag to make a purchase, it could be just one or two kilograms,” he says.
“We want to deliver the highest value to the producer and the lowest price to the consumer by simplifying the production and logistics supply chain via direct trade.”
Magalhães says preparing the next generation of producers is still a top priority, and with this commitment is the production of specialty grade, “superior coffee”, which equates to 200,000 of the 1.8 million bags Minasul cooperative members produce each year. Of that volume, Magalhães says a total 50,000 bags were sold at the ideal price for specialty coffee.
“We have a big opportunity to evolve in this area. We want to increase productivity and increase the quality of our coffee at the same time. We are doing a lot of work to change the perception of quality coffee in Brazil,” he says.
“We have employed eight Q Graders to help us with this. We are the first cooperative to do specialty coffee courses in Brazil. And we will continue to incentivise and award producers who produce the best coffee.”
Magalhães has long been a producer, but shares a background in technology, which is why he believes so highly in innovation and the need to prepare cooperatives to access new markets.
“I truly believe in innovation, and the possibilities we can provide to producers,” he says.
“We have a 2030 roadmap. Within this decade, we are working on logistics and focusing on transporting coffee via trucks to trains due to the high cost in Brazil. The most important strategy is to shorten the distance between the producer and the consumers.”
For now, however, the goal is to double Minasul’s revenue by the end of 2022 and grow its members.
“During my time as a producer, I’ve watched production increase from eight to 32 bags of coffee per hectare, but the sector as a whole, in terms of commercialising, selling, and accessing markets, is behind,” Magalhães says. “Changing this has been our big focus since the beginning. That’s why we’re preparing the cooperatives to access new markets, export to more than 35 countries, and show members how to sell abroad and better present their product.”