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You'll find all the links and details in the show notes. Welcome to the Daily Coffee Pro by Mapper Forward Friends. I'm your host, Lee Safar, and this is episode one of a brand new five-part series with everyone's favorite, one of the many times Jonas Lemmy-Ferrarisel has been on the podcast, Brazilian coffee agronomist Jonas, welcome back to the podcast for, I don't know, maybe the 10th time, but it's fine. It's great to have you, Jonas.
Thank you, Lee. Thank you so much. It's always great to come here and bring some updates, what I see in the last year, and what's happening, and what's maybe will happen to the coffee chain. You know, I remember one of the times we talked on the podcast was a few days before the Russia war was about to break out.
And we really didn't know if that was going to happen and how long it was going to go on for. We were speculating at the time. And then it did happen. And here we are again, for reference sake, we're recording this on the 17th of March.
And we are in another war that is on top of the Russia-Ukraine war is still going on a few years later. We have the war in West Asia. We're trying to refer to it as West Asia rather than the Middle East now, but we have the war that's going on between Israel slash the U.S. and Iran.
And there's a lot of tension that's going on. And the coffee industry seems to think that this is not going to impact the coffee industry. A lot of people think that there are people who know this is serious and they have their heads down and they know that this is going to affect coffee. But Jonas, I wanted to have you back on the podcast so that we can talk about two major things that are happening in coffee right now.
One of them is this war and the other one is the Brazilian harvest for 2026. And in my mind, these two things are crashing up against each other. And you and I had a chat to prepare for this. And we both agree that this is significant and there will be significant impacts to the coffee industry.
So we're going to talk about all of those things in this five part series, folks. And we hope that you feel more informed after this series and are able to make better decisions. Jonas is going to give us an update on, as someone who is on the ground in Brazil, talks to agronomists, his fellow agronomists, speaks to farmers, he knows what's going on. He's going to share the information so that you don't have to worry about hearing speculation.
You're hearing it from somebody who was on the ground there. In this episode, we're going to talk about how this war, that's where we're going to start and anchor this conversation, how will this war impact coffee production in Brazil? And we're going to go into how that's going to impact the coffee industry at large beyond that. OK, so Jonas, very quickly, will you remind people where you are and what you're doing?
I'm an agronomist from Brazil. I am a son of a coffee farmer, a very small one. And all my career is dedicated to coffee as an agronomist since my first day on the university until now. I work with coffee farmers from different levels, different types, like since the organic coffee until the very traditional and commercial grade coffee that the conventional farmer do.
And with agroforestry systems, regenerative agriculture. So I love to dive into different spectrums. I don't know if it's the right word. From the coffee growing, because for me, it's important to understand all and find the better paths from the farmer.
I work with a specialty coffee too, with all the farmers, because they still important for the farmers in some way, even with the price not as good for specialty as usual, but it's important to them, in my opinion. So it's how I do. I go to the coffee fields in the two areas of Arabica in Brazil, the two main states, São Paulo and Minas Gerais. And when I travel, I see coffee farms and chocolate farmers around the neighborhood of the farmers that I assist to understand what are the issues and what they are seeing for the future.
So it's part of what I do for living. So the reason I wanted you to mention that again, you know, people know who you are, but I wanted people to understand everything we're about to talk about is from the perspective of somebody, as I said, that's there. OK, so there are a lot of things happening with the sea market right now that people don't understand why it's happening. The way that it's happening.
Is it speculators? Is it not speculators? Is it because Brazil is going to have so much coffee? This is the real information, guys.
OK, so keep that. Please keep that in mind with everything as we're going through this series. Now, as I mentioned, we're going to be talking about how this war is going to impact coffee production in Brazil. And from your perspective, Jonas, where is the largest impact going to be?
I think one thing that is important to understand and many times people don't have in mind is the size of coffee farming in Brazil, not only in terms of the total of land, but how the land is spread across the country. So probably we have coffee in the extreme north of Brazil in Rondônia, where we grow robusta and canephora. And in almost the extreme south of Brazil, where we grow Arabica in the state of Paraná. So it's totally different technology, totally different sizes of farmers.
And everyone have their own challenges. We're talking about two million hectares of coffee growing. And even I, that like I drive almost, let me say, two or three thousand kilometers a month in coffee farms, and I just could see a small part of that. And how it's complicated to say coffee in Brazil, it's in a very high production or a very low production.
We understand that the challenge is to monitor the coffee across the land. And what I do, for instance, as I can't drive everywhere, I talk with agronomists and farms in every region to understand what they see. I'm sorry, I just forget your request. What's going to be the largest impact that it's going to have?
For the war, yes. For me, it's the largest impact seeing what all these farmers need. The first one is energy. You can't say when we have a problem with energy, no matter what kind of energy it is, in this case is oil.
In certain ways will impact coffee in every chain that needs energy for something. Coffee, we need energy to run tractors. When we talk just about oil, to run the harvesters, harvesting machines, to take the pickers to the field to pick the coffee with their car or their motorcycles. So oil is very important to all the chains that we have.
This is the primary impact, which is very in short term that we see because the oil price, the gas prices worldwide are red rising in the pumps. I don't know if it's the right term. At the pump. So we already see that in Brazil and worldwide.
So it costs more to the farmer to buy diesel for their tractors in the pump. The second impact it's we're going to see yet it's about fertilizers. The nitrogen-based fertilizers need gas to be made, the gas from the oil that they use in the same chain, and to how can I say that, like to build this nitrogen, they use gas and they take the nitrogen from the air in a very complex industrialized process. And they make this from the nitrogen-based, if I'm not mistaken, ammonia.
And from ammonia, they take all the kinds of different fertilizers, nitrogen-based like urea or nitrates or sulfates, nitrate sulfates in every kind of nitrogen-based. And the nitrogen-based is important for coffee. It's the nutrients that we use in more scale in coffee growing. After that is potassium.
Potassium. I forget the word in English. Potassium. Potassium.
That's why when we have the war in Russia, we were worried about that because they are a great supplier of potassium and nitrogen too because of the oil that they have. But now the problem is how this impacts the prices in the international market for the farmer. For now, this is not a short-term issue because we are not fertilizing coffee right now in Brazil. We will start the fertilization about September.
And we're going to see if this war is going to last as long. We don't know. This will directly impact the fertilizer's price because sometimes just if one nutrient one nutrient have a issue, we know that other nutrients come along no matter if not a shortage for that, but it's how the market works. We saw that in the Russia war when the prices spike from more than a double that used to be the all the fertilizers.
So we're going to see that and the farmers usually pay the price for this issue. We don't know yet how this impacts trade in certain ways because in my opinion, if we have some, for me, it's a global crisis when we have something like that, how this will impact people trade and how people are going to consume coffee? How will the relation with exportation if we saw that in the pandemic when we saw some issue related to trade, what is more important to trade than coffee? What we could put in the Trump, the second Trump era, we saw a lot of dollar changing in the domestic market.
I know the dollar, the value worldwide. And in Brazil, we have that impact too. And the economy in Brazil, it's not, of course, the best economy, but it's more stabilized than usual. So the dollar dropped, how can I say, maybe more than 20 or 30% in the last year since the Trump era.
So this impact the prices, the international prices paid for the farmer in the domestic market because the dollar prices, say, give to the farmers more national money, let me say it that way, to the spending. And so if the dollar dropped and the international prices of coffee dropped, we saw dropping domestic prices for the farmers. The price is not worse than was used to be before, but it's below the expectation that farmers had in mind for this period of time. Usually in Brazil, I think worldwide, the coffee prices better between February and March when we have some kind of spiking usually because we already finished the 2025, for instance, season stocks, and we're not starting to harvest the new season.
So at least in the last years, we saw this kind of good prices for this period of the year. But now we see the opposite. We had better prices in January because of coffee and dollar prices. And now some farmers that are expecting to sell their beans now, they are facing low prices and in the market, in the domestic market.
The dollar, it's not only an issue for farmers because If we have a dollar price below average, all the inputs in coffee could cost less if everything went fine, like agrochemicals, oil usually, and fertilizers because everything is charged in dollars. So this could mean a good thing, but with the war happening, probably farmers will not see this pricing drop at least in short terms. So if I understand everything that you've said correctly, the size of Brazil and the way that the industry is organized means that it's complex. And it means that if we look at energy and fertilizer as two big parts of growing coffee, add to that the situation that's happening with not just the supply of those two things, but the cost of those two things.
And the US dollar moving in different directions, depending on what's happening on the day, what you have is a lot of energy needed to move around Brazil, to move the coffee around, to grow the coffee, to harvest the coffee, to process the coffee, to take the coffee to port and export it, and then to get it to the consuming country. The cost of all of that is inflating because of this war. The availability of it is also going to be a problem. And depending on how long this war goes, it may continue to be an even bigger problem.
Let's say we get to September and this is continuing to go on. By the time obviously the fertilizer needs to be in Brazil a lot sooner than September. But if there is a shortage, 35% of the urea that comes out of, or the nitrogen-based fertilizers that are used in the world, 35% of them come out of the Middle East or West Asia. So that's going to be a major problem if we can't get it to Brazil when the coffee harvest is happening.
I have a question for you. And this is not your specialty, so if you don't have the answer, that's totally okay. And I'm sorry to spring this on you, but for example, in Australia right now, there's a lot of harvesting going on in some crops, and there are soon going to be fertilizers that are needed. There's a lot of talk about fertilizers that are needed for farms right now for different crops.
Is that what's happening in Brazil? So if fertilizer may not be needed till September for coffee, but will they be needed for other crops earlier than that? Not mostly of crops because we are entering the dry season in Brazil. So during the dry season, we grow some stuff in some areas in the south of Brazil and in the north of Brazil, but the huge amount of fertilizers that we need is for huge crops like soybeans, corn, coffee, and sugarcane.
And most of this crop needs to be in the wet season that starts in September. We have like in the south of Brazil, we have rains during the dry season, but we grow like wheat and some other stuff, but it's not represent a lot in the exportation, the agro-business of Brazil. So probably the stocks that we have already in Brazil will attend the needs from these farmers. And in the north of Brazil too, we have a season in the dry season in the Northeast that we plant some fruits, some sugarcane, but they are important for exportation, but they not represent a lot in the agro-business in Brazil in terms when we compare it with corn, soy, cotton, and coffee.
So I think we have enough for them for now. But when they start September, all these huge crops, we need a lot of fertilizers and then it will be complicated if we not have enough of this fertilizer ready in Brazil to start the fertilization season. As we wrap up my last question is, is there a backup plan being formulated as far as you know, if the fertilizer doesn't arrive? We, I don't know if the government still with this deal trade deals, when we have the war in Russia, Brazil made a lot of trade deals with different countries in order to diversify the countries that it could buy fertilizers.
I know Canada and is one of them and probably Russia too in that time. Russia was the issue. Now they're kind of not, but it's always issues when we trade with Russia. We will depend on what they move or what they are expecting to do with this kind of opportunity for them with all this war.
But I know since the war in Ukraine, Brazil started to do this trading again. For now, I do not see anything in Brazil about that. We, you know, in Brazil, we are this season this year. It will be election year.
So a lot of politics are more interested in other things. So they, I don't know, I hope they are thinking about some way to see if we have some ways to do with that in the past, like, let me say 20 years, Brazil have industries of urea here. But since the Russia and other countries or Middle East are sourcing nitrogen based in a more cheaper price than do it here in the national industry, along the years, the industry are not more, uh, producing a lot of nitrogen based fertilizers. Like I said, when we had the crisis in Ukraine, government start to give more incentives.
I don't know if the right word for it to this industry in order to start to do this nitrogen based fertilizers again. But it's more than two or three years that I do not hear anything about if they do it or they not do it, because, you know, as the pandemic, when we have the pandemic, everyone said, okay, we cannot put all our cards in China. If something happened there, we should do something. But when everything starts to be stable, people are less interested in, in doing stuff because Chinese still do in a more cheaper way.
So it's about profit. So in the end of the day, they wait until everything happens again to find, okay, let's do something until everything is stabilized again. And we start to buy stuff from another country that is cheaper. It's how the world works.
And I think the national nitrogen based industry, I don't know if they are working as they are expecting to work after the Ukrainian war. It will be interesting to see where this goes. In the next episode, guys, we're going to talk about the 2026 Brazil harvest and what we can, what the expectations are at this point. So join us for episode two of this series.
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