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Central America coffee exports to return to growth in 2020-21

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Central American coffee exports will return to growth in 2020-21, led by a recovery in Honduran output fostered by a fertilizer giveaway, which will more than offset further declines in El Salvador and Nicaragua.

 

Coffee exports from the key Central American origins – Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, plus Mexico – will total 15.84m bags in 2020-21, analysis of forecasts from US Department of Agriculture bureaux in the countries shows.

 

That would represent an increase of 450,000 bags year on year, the first increase in three seasons - following a downturn attributed to a range of causes, including lingering coffee rust outbreaks in some plantations, notably in El Salvador, but reflecting largely weak prices which deterred growers from investing in crops.

 

Nonetheless, the region’s exports would remain well below the record high of 18.23m bags, set in 2016-17.

 

Price relatives

The region, while growing small quantities of robusta beans in Guatemala, Nicaragua and Mexico, is a key producer of high quality, washed or mild arabica beans, shipped largely to the US, as well as Europe and Japan.

 

Although its coffee earns a premium over, for example, the more commodity beans produced in the likes of Brazil, the add-on has been insufficient to cover the relatively highs of output for an area still reliant to a greater extent on labour, rather than mechanisation, notably in harvesting.

 

The premium of so-called “other milds” arabica beans - as grown in the main in Central America, with some produced in the likes of Peru, the Caribbean and central Africa too – over Brazilian natural arabica beans actually averaged 48.15 cents a pound last month, its highest in at least seven years, on International Coffee Organization data.

 

However, that was down to weakness in the values of Brazilian naturals, as the South American country began what is expected to be a record harvest, rather than strength in prices of other mild beans.

 

Indeed, some commentators forecast relatively weakness ahead for values of washed arabica beans, given their particular popularity in the coffee shop sector – which has suffered a large loss in business thanks to Covid-19 lockdowns.

 

Free fertilizer

The growth in exports in 2020-21, as starts in October, was seen led by Honduras, which would see shipments recover by 488,000 bags from the four-year low of 5.09m tonnes expected for this season.

 

For 2019-20, “exports were affected by a decrease in production due to a drought followed by 20 days of excess rain”, which “affected coffee quality and limited the capacity to harvest”, said the USDA bureau in Tegucigalpa, noting too some logistical hiccups stemming from the pandemic.

 

Honduran output next season, meanwhile, was seen recovering by 536,000 bags to 6.13m bags, if remaining well below the 2017-18 high of 7.60m bags, with revival fostered by the government’s “coffee bonus” programme donating free fertilizer to more than 91,000 small- and medium-sized operators.

 

“The fertilizer will help to increase production and allow farmers to use money that is normally spent on fertilizer to perform maintenance.”

 

Nicaragua, El Salvador declines

Output in Mexico will rebound too, by 200,00 bags to 3.90m bags, supports by results from campaigns such as a replanting with trees resistant to the coffee rust fungus.

 

However, production in Nicaragua will fall by 115,000 bags year on year to five-year low of 2.27m bags, undermined by tight credit conditions at a time when agrichemical costs of 10-20% thanks to the removal of tax exemption on these inputs.

 

Nicaraguan coffee exports in 2020-21 will fall by 65,000 bags to 2.14m bags.

 

‘Historic low’

Production from El Salvador, meanwhile, will shrink to 475,000 bags, beneath even the “historic low” of 505,000 bags estimated for this season, and the lowest on data going back 60 years.

 

The USDA bureau in San Salvador noted setbacks from factors including a “lack of fertilizer, continued damage by leaf rust… and lack of profitability due to low production yields and low international prices”, which is deterring investment in plantations.

 

The country’s exports will shrink by 27,000 bags year on year to 424,000 bags, also the lowest since at least 1960, when El Salvador was the region’s second-ranked exporter, behind Mexico.

 

The six countries’ overall production for 2020-21 will grow by 604,000 bags to 17.93m bags, below a recent high of 20.30m bags set in 2017-18.

 

The record high was, of 20.44m bags, was set in 1999-00.

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