Saturday, June 27th, 2015 | USD: Buy 528.81 / Sell 541.11
By W. Alejandro Sanchez
April 1st, 2014 (VOXXI) Over the past couple of years, coffee production in Central America has been hit by a deadly wave of coffee leaf rust (“roya” in Spanish), a type of fungus that has hurt the production of this valued commodity in the region. The Central American Secretariat for Economic Integration has quoted statistics by the International Coffee Organization (ICO) which estimates that Central American states lost roughly $243 million USD between 2012-2013 due to this fungus.
This is no pocket change for developing nations, as much of their economy is centered on exporting coffee and other basic commodities.
Central American states between southern Mexico and Panama have been particularly hit with a wave of coffee rust (it has also expanded farther south, to countries like Peru). A May 2013 report by the ICO explained that “the epidemic affecting the region [is] the worst seen since the pest first appeared in Central America in 1976.”
Honduras has suffered the biggest loss, totaling $90 million USD. This is a tragic development for a country that has experienced political instability and underdevelopment for years. (I discussed whether Honduras can be qualified as a semi-failed state in an August 9, 2013, commentary for VOXXI).
Honduran coffee exports between October 2013 and February 2014 were just over 1,800 million quintales (bags of 46 kilograms). This is 17.19% less than the same period one year ago, according to Honduras’ Institute of Coffee.
Costa Rica and Nicaragua have lost around $46 million USD each, while Guatemala lost $28 million USD. In Nicaragua there are some 125 thousand hectares used for coffee production, and between 37 and 69 thousand have been infected by the coffee rust, according to Oxfam, a global development organization. The loss of so many hectares is a major problem as the coffee industry in Nicaragua provides jobs, permanent and seasonal, to some 500 to 600 thousand people.
Central America’s presence in the global coffee market has understandably been diminished due to decreasing exports. In 2011 the region produced 11% of the world’s total production of coffee, but in 2013 it dropped down to only 8%.
An estimated 83% of coffee production in Central America is destined for export. As much as 36% of its coffee goes to the U.S., while Germany receives 15%.
It is debatable to what extent climate change is to blame for the spread of this fungus. In a January 2013 BBC report Guatemalan coffee experts argued that in recent years, changes in the environment have included higher temperatures and more rain, contributing to the coffee rust’s expansion.
To make matters worse, the disruption in the ecological balance due to coffee rust has also affected other regional industries. Guatemala reports that honey is produced in the same areas where coffee grows, but due to the coffee rust and global climate change (which has brought other plagues), honey production in the country is expected to fall by 40% for the 2013-2014 harvest.
It is unclear if things will improve in the near future. An October meeting in Costa Rica concluded that the region will need two-three years to bounce back from this crisis. The theory is that in order to stop the coffee rust, producers will have to prune up to 28% of their coffee crops. It will then take two years for the new rust-free (hopefully) plants to produce back to full capacity.
Unfortunately, the chemicals that can be used for fumigation to eliminate the rust are unaffordable for many farmers.
In Guatemala, 45% of coffee growers are small farmers while 8% are large companies. In other words, the government needs to step in and provide subsidies for fumigation and pruning initiatives so that small farmers can survive the crisis and successfully grow their crops once again.
Nevertheless, there is reason to believe that Guatemala can bounce back soon. In January, it was reported that the Guatemalan government purchased coffee seeds that are resistant to the fungus and hopes to replant one tenth of the 276 thousand hectares of coffee in the country by the end of the year (the government will provide these seeds free of charge).
However, even after the coffee rust (eventually) recedes, Central American governments and coffee producers will have to convince their clients, such as Starbucks or Green Mountain Coffee Roasters that their coffee grains are once again of high quality and safe.
The coffee leaf rust that is plaguing the region is not just an inconvenience; it has been, and will continue to be, a challenge to the livelihood of thousands of Central Americans involved in the coffee industry. The situation also has political and security implications as unemployed farmers could turn to criminal activities in order to survive, or protests could occur if regional governments are perceived to be inefficient to deal with this situation.
At best, the current wave of coffee leaf rust will not spread anymore and Central American farmers will, slowly, recover their crops. But this may just be wishful thinking.