Agrimoney Commentary on Central American Coffee Crop

 Central American coffee crop to revive - a bit - from surprise dip
By Mike Verdin - Published 08/06/2016

Central American coffee production will recover somewhat next season from a surprise decline in the latest harvest to an 11-year low - but will remain below average, curtailing exports too.
The big six Central American producing countries – Costa Rica, El Salvador, Guatemala, Honduras, Mexico and Honduras – will harvest 16.14m bags of coffee beans in 2016-17, US Department of Agriculture foreign staff said.
That would represent a recovery of nearly 500,000 bags from regional output expected in 2015-16 which, at 15.64m bags, is seen showing a decline that the USDA had not initially expected.
Nonetheless, next season's production will remain below the average of 17.3m bags for the first five years of the decade.
Mexico has represented the biggest disappointment in the region - which grows primarily washed arabica coffee beans - with its growers still struggling against an outbreak of coffee rust, which also curtailed the El Salvador harvest.
Elevated temperatures blamed on El Nino were cited in an unexpected drop in Nicaraguan output to a six-year low.
'Affected by coffee rust'
In Mexico - where output slumped by 29% to 2.25m bags in 2015-16, the weakest harvest in more than 50 years – rust will remain a problem for next season too.
Central American coffee output 2016-17 and (year-on-yearchange)
Honduras: 6.133m bags, (+3.9%)
Guatemala: 3.373m bags, (-1.7%)
Mexico: 2.300m bags, (+2.2%)
Nicaragua: 2.023m bags, (+6.3%)
Costa Rica: 1.700m bags, (+2.8%)
El Salvador: 608,000 bags, (+21%)
Total: 16.137m bags, (+3.2%)
Sources: USDA attaché reports, Agrimoney.com

"The coffee planted area nationwide has been affected by coffee rust," the USDA's Mexico City bureau said, flagging that while the government was taking steps to help growers replant with rust-resistant varieties, the impact of measures to counter the fungus would be limited for now.
 
"Producers in Mexico indicate the coffee production for 2016-17 is forecast to grow slightly as a result of efforts from growers to control coffee rust and renovation of plantations," the bureau said, forecasting a 50,000-bag increase in output.
But government officials have said that do not until 2018-19 expect Mexico to "recover most of its past production".
Mexico's output peaked at 6.19m bags in 1999-00, although more recently its harvests have averaged a little over 4m bags.
A shortage of labour, which has seen wages grow to account for 80% of total production costs, has also curbed production.
'Continued damage'
Output in El Salvador too will, at 608,000 bags for the next harvest, remain depressed by historical standards, if above the latest crop of 501,000 bags which was by far the lowest on USDA records going back to the 1960s.
Central American coffee exports 2016-17 and (year-on-yearchange)
Honduras: 5.673m bags, (+4.2%)
Guatemala: 3.066m bags, (-1.7%)
Nicaragua: 1.826m bags, (+2.4%)
Mexico: 1.825m bags, (+1.5%)
Costa Rica: 1.450m bags, (+2.8%)
El Salvador: 528,000 bags, (+25%)
Total: 14.368m bags, (+2.8%)
Sources: USDA attaché reports, Agrimoney.com

Coffee rust is wreaking "continued damage" on El Salvador plantations, USDA staff in San Salvador said, with the latest harvest hurt by "severe drought" caused by El Nino as well.
However, USDA analysts were more upbeat about Nicaragua's harvest which, having taken a hit last year from El Nino-induced dryness, was seen recovering back above 2.0m bags in 2016-17, in line with average levels.
And the harvest in Honduras, the region's top producer, was seen topping 6m bags for the first time, although a rise of 130,000 bags, or 4%, year on year was below the recent average growth rate, a hangover from squeezed margins in 2015-16.
"Low coffee prices resulted in a lack of profits needed to meet loan repayments," the USDA bureau in Tegucigalpa said.
"The current economic situation has limited them to access new credits and cover basic operating costs to increase production."
Export prospects
The increase in output will allow a recovery in Central American coffee exports to 14.4m bags in 2016-17 - from current season levels, expected at a little under 14m bags.
Even so, next season's shipments will remain below the average of 15.2m bags in the five years to 2014-15.
Honduran exports will, at a record 5.67m bags next season, account for most of the increase.
"Honduras has a growing reputation as a specialty coffee power player," USDA staff said.
"As demand for high quality arabica coffees continues to rise, the commitment of Honduras represents an opportunity to build the supply chain for US coffee roasters."
The US is actually the second-ranked destination for Honduran coffee exports, behind Germany.
Mexican exports, primarily sent to the US, will rise by a modest 27,000 bags year on year to 1.83m bags, remaining at half levels seen earlier in the decade.
Employment implications
The USDA briefings also stressed the importance of the coffee industry to Central American countries, with the sector seen as providing employment for 1m Hondurans.
In Nicaragua, the sector employs 332,000 people, "equivalent to 15% of the labour market".
In El Salvador, the "drastic" drop in production wrought by the rust has cut fungus has cut coffee farm jobs, over five seasons, by more than 70% to 37,000.
"Jobs in coffee areas continue to decline causing a stream of migration to the urban areas in search of employment opportunities," USDA staff said.
"It is estimated that approximately 10,000 jobs are lost for every 100,000 hundredweight (45,000-tonne) drop in production."