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Issue Date: Vol. 53, No. 5, May 2013, Posted On: 5/30/2013


Coffee Supply Questions: Fungus Raises Production Costs For Central American Growers


By Brian Martell
TAGS: office coffee service, OCS business, coffee trends, Central America coffee crop, fungal infestation on coffee, roya, coffee rust, coffee tree, orange-colored spores, El Salvador coffee plantations, coffee infection, Guatemala coffee plantations, gourmet coffee trade, ICE Futures, Brian Martell, Heritage Coffee Co.


The coffee growing regions of Central America are in a state of concern as they deal with a fungal infestation known as roya, or more commonly, "coffee rust." Roya attacks the leaves of the coffee trees leaving orange-colored spores (hence the name "rust") on the underside, which eventually will turn the leaves black before they fall off completely. If left unchecked, coffee rust can kill a tree. In most cases, roya will weaken the tree, leaving it unable to produce cherries.

Earlier this year, it was reported that more than half of El Salvador's coffee plantations were infected, more than 40% of Guatemala's plantations had the blight, and Honduras, the region's largest producer, was to see a decline in exports by as much as 5%, with at least 10% of its crops affected. Costa Rica, which boasts some of the most sought-after coffees for the gourmet trade, has seen 30% of its coffee plantations affected by rust.

In the late 1800s, coffee rust was responsible for the transformation of Ceylon (current-day Sri Lanka) from a coffee producer to a tea producer, and some believe that the trend towards less plant diversity in the coffee industry is increasing the possibility that the same thing will happen in Central America. Farmers in these regions, while concerned about dropping production at a time when prices have come down from their peaks, are faced with spending more on field husbandry in the form of fungicides to counter the blight -- something the Ceylonese did not have 130 years ago.

PRICE DETERMINATION

The coffee market is driven by the activity of two main exchanges, ICE Futures U.S. in New York City (part of the Intercontinental Exchange) and the London International Financial Futures and Options Exchange (LIFFE); so world prices may not necessarily catch up with regional shortages. Relative abundance of world coffee has seen a decline in the market from the highs of mid 2011, and the market continues to soften to lows not seen since early 2010.

So what is to become of the coffees from Central America? Like the farmers in most agricultural regions, Central American coffee producers will continue to maximize their earning potentials while looking out for their investment in their land and crops. The coffee industry still is a major source of income for many families and communities in Central America, and they will explore the possible solutions that make the most sense to them.

Of these, continued use of fungicides will help farmers maintain yields necessary to sustain economic viability in the short term, while the introduction of rust-resistant trees through their nurseries may provide mid- to long-term relief from rust. It is possible that farmers will also look to ways of genetically diversifying their coffee plantations to make it harder for rust to propagate. Like bananas, many coffee trees are virtual clones, leaving them susceptible to opportunistic blights similar to the one afflicting Cavendish bananas.

For consuming countries, the near and midterm effect may be a shortage of good-quality coffees coming from Central America, or inflated differentials for what is available. The vast majority of coffees from this region are washed Arabicas that do have a distinct flavor profile not easily replicated elsewhere in the coffee-growing world. So while the price of coffee traded on the exchanges may remain static, the possibility exists that there will be price fluctuations for blends requiring Central American coffees.

As with all events in every industry, nothing good ever lasts forever, but then again, nothing bad does either.


BRIAN MARTELL is vice-president of sales for Heritage Coffee Co.'s Montreal-based Canadian division. Martell won the Canadian Automatic Merchandising Association's Customer Service Award for 2012, honoring his personal approach to customers. Martell is a recipient of the Don Storey Award (2008) and the Stuart Daw Gold Service Award (2010) and so is the first CAMA member to earn all three accolades.


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