February 20, 2013 7:02 am

Coffee price fall exacerbates fungus woes

Weak arabica prices will hurt farmers’ regeneration efforts

Coffee drinkers are celebrating. Only this week, US roaster JM Smucker cut retail prices on its flagship brand Folgers as arabica coffee prices have fallen.

In contrast, coffee growers in Central America are hurting due to the spread of la roya, the deadly leaf rust fungus. The outbreak has yet to affect the arabica market, but it would have grave consequences for the coffee industries in countries including Costa Rica, Guatemala, and El Salvador, which is dominated by small growers.

Authorities in Costa Rica have declared a state of emergency to tackle the spread of the coffee tree fungus. And industry talk cite significant – although yet to be confirmed – losses in Guatemala and El Salvador.

Luis Samper, of the Colombian Coffee Growers Federation, which represents some 500,000 coffee farmers in the country, has seen it all before.

Colombia, a top producer of high quality arabica beans, was hit by la roya five years ago. With infestation levels reaching about 40 per cent of its trees planted, coffee growers embarked on a large-scale replanting programme of coffee trees.

The federation, with support from the Colombian government, has spent $1.4bn on the programme providing fungus resilient plants, fertiliser, seeds and education. “It was quite an undertaking,” says Mr Samper.

Colombia has blamed climate change, increased moisture and precipitation caused by the La Nina weather phenomenon for the spread of the disease.

After four years of the conversion programme, half of the trees have been replanted. By 2015, the federation believes it will hit its target of 85-90 per cent.

However, the fall in arabica price is adding to the coffee growers’ woes. Lower revenues will hit Colombia’s ongoing regeneration programme as well as the Central American governments’ fight against the fungus, says Mr Samper. Arabica prices are fluctuating around $1.40 a pound, compared to the 2011 average of about $2.55, and $1.76 in 2012.

Arabica coffee price

The market’s fall has pushed down Colombia’s acreage for replanting this year from 120,000 hectares to 100,000 hectares, he says.

Many Central American coffee industry executives have visited Colombia to learn from their experience, but the fall in the coffee price will make the implementation of similar programmes less affordable.

Central America accounts for about 17 per cent of world output, but with the cost of production relatively high – analysts estimate $1.50 a pound – the region’s coffee revival may drag on if the market remains at current levels.

The Commodities Note is a recurring online commentary on the industry from the Financial Times

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