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Coffee Rust Epidemic Threatens To Drive Up Arabica Prices

Posted On: 5/19/2014

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TAGS: coffee rust crisis, coffee service prices, coffee prices, coffee researcher, coffee rust fungus, coffee prices, coffee crop damage, Arabica coffee price, la roya, coffee, fungal disease, International Coffee Organization, Central America's coffee farms infected, U.S. Agency for International Development, Texas A&M University's World Coffee Research

WASHINGTON -- The U.S. government is working with researchers to eradicate the coffee rust fungus that has caused $1 billion in damage to Latin American crops and is threatening to further drive up Arabica coffee prices. Coffee rust, or la roya, is a highly contagious fungal disease to which Arabica coffee beans are susceptible. It has spread far and fast, driven by higher temperatures in the region that have allowed the fungus to thrive at higher altitudes.

The countries hardest hit by the devastating fungus are Guatemala, El Salvador, Honduras, Panama and Costa Rica, where many smaller farmers lack the resources to obtain the fungicides to combat the disease and the training to plant in ways to avoid contamination.

According to the International Coffee Organization, the current epidemic of coffee leaf rust is the highest incidence in 40 years, with more than half of Central America's coffee farms infected, and losses reaching $1 billion in the 2012-2013 harvest.

In a new program, the U.S. Agency for International Development will invest in a $5 million partnership with Texas A&M University's World Coffee Research center to try to eliminate the fungus by stepping up research on rust-resistant coffee varieties and helping Latin America better monitor and respond to outbreaks of the fungus.

"The current coffee rust outbreak is the worst in Latin America's history," the agency said. "It is estimated that production will fall by as much as 15% to 40% in the coming years."

Prices for Arabica coffee skyrocketed earlier this month, driven mostly by a drought in Brazil, the world's largest producer. The coffee rust crisis is threatening to contribute to a further decrease in supply and drive prices higher.

Arabica prices have shot up 70% to 80% since last November from $1.06 a pound to around $2.15 per pound currently. The last time Arabica coffee prices rose sharply was in May 2011, when they hit an all-time high of $3.089 a pound.

Brazil is expected to produce just 49 million bags of Arabica coffee in the 2014-2015 season, compared with 53.3 million bags last year. This will lead to a shortfall of 7.1 million bags below global demand, the largest deficit since the 2009-2010 season.