STiR Tea & Coffee International / April 1, 2015
By Larry Luxner
On the side of a steep mountain overlooking the little town of La Libertad in the department of Huehuetenango, Leonardo Samayoa spends his days picking coffee beans.
“I work from 6 a.m. until 3 p.m. without rest, como un taco,” says the 67-year-old campesino, who’s done pretty much the same thing six days a week for half a century. For his trouble, Samayoa earns 2,000 quetzals a month — the equivalent of about $260.
“My parents didn’t send me to school, though I did learn to read and write at the age of 25,” said Samayoa, a member of La Libertad’s Esquipulas coffee cooperative, as he filled his basket with bright red arabica beans. “Thanks to coffee, at least my son went to high school.”
Iliana Martínez is manager of Samayoa’s co-op, which operates from a storefront office along the main street of La Libertad, located 317 miles from Guatemala City at an altitude of 1,700 meters above sea level. Founded in 1964, the association now has 945 members, up from 680 members in 2012 and 380 back in 2007.
In 2002, when plummeting prices forced thousands of Guatemalan coffee growers into bankruptcy, she said, many people from this area emigrated to the United States. But that changed when local farmers banded together and established the co-op.
“Here, coffee is our number one activity. About 90% of La Libertad depends on coffee,” said local grower Luís Felipe Pascual. “So if the coffee industry ever collapsed, it would affect every family here. It would be catastrophic for us.”
Sadly, such a catastrophe seems to be unfolding throughout Guatemala once again, though this time it’s being caused not by low commodity prices — but by a devastating fungus known as roya that rots the leaves of coffee plants.
“In the last harvest, our production was down by 20% here at our co-op,” said Martínez, estimating that the fight against roya has forced up production costs at the Esquipulas co-op by at least 20%. “It is very difficult to face this crisis because we get no subsidies or government support to at least help alleviate this situation.”
On a national level, it’s even worse. Production has fallen by around 40%, said Miguel Medina, president of Guatemala’s Asociación Nacional de Café (Anacafé).
“During 2014, the rust affected 65% to 70% of our total cultivated area,” said Medina. That’s between 200,000 and 213,000 infected hectares, given that roughly 305,000 hectares — about 2.8% of Guatemala’s land area — is planted with coffee.
“Even though it was severe, we can say that most of it was between levels two and three on a scale of one to four — while in 2013, it was between levels three and four,” Medina explained in a lengthy interview with this reporter. “Our goal is to maintain rust between levels one and two, which is what we call the preventive state of rust, and control it without any economic damage to coffee production.”
Yet Julio Ligorría, Guatemala’s ambassador to the United States, said farmers and exporters throughout Central America have little choice but to get used to the disease.
“Roya in Guatemala is here to stay, and the coffee growers need to learn to live with it and prevent it yearly by applying fungicides in a timely manner,” Ligorría said. “Given that most coffee producers are micro- and small-sized, it is more difficult to control and make sure all of them do their best effort. That is why in some cases Anacafé recommends rust-resistant varieties.”
Medina says Anacafé has purchased 30,000 liters of fungicide in each of the past two years — at a cost of $2.5 million annually — in order to give producers the lowest prices possible. That was enough to cover 80,000 hectares, which is only one-third of the acreage now affected by coffee rust. In total, he said the organization has spent about $15 million to control roya.
Anacafé, a nonprofit organization, has 125,000 members and assesses a 1% tax on the FOB price of all coffee exported from Guatemala — an arrangement that generates $6 million to $10 million a year. In return, it offers its members promotion and technical assistance, as well as a sophisticated soil and leaf analysis lab.
Medina, whose family has been in the coffee business since 1883, has headed Anacafé since mid-November. Before that, he was vice-president for two years, and was on Anacafé’s board of directors for two years before that.
“The way I see it, people need access to medicine, health and education, which in these times have become luxuries,” Medina told us. “But they still need to eat. So they have two options: leave the country and go to the U.S., or stay here and maybe become part of the crime scene.”
Guatemala ranks eighth in worldwide coffee exports — just behind Peru and just ahead of Mexico — and accounts for about 3.5% of the total, according to Anacafe. The largest exporters are Brazil (26.7% of total exports), followed by Vietnam, Colombia, Indonesia and India. Among Central American countries, Guatemala ranks second after Honduras (5%), but it’s still far ahead of Nicaragua (1.5%) and Costa Rica (1.3%).
Guatemala’s area planted with coffee has increased by 10.5% in the last eight years, from 276,000 hectares in 2006 to 305,000 as of September 2014. Meanwhile, the number of producers has jumped by 35% over the same period, from 90,000 in 2006 to about 125,000 today.
In the first 10 months of 2014, coffee exports generated $628.5 million — surpassed among all agricultural products only by sugar ($777.1 million), according to the Bank of Guatemala. That put coffee ahead of bananas ($550.9 million), fresh fruit ($189.5 million) and cardamom ($170.9 million).
Calculated another way, during the 2013-14 growing season, exports came to 4.08 million quintales (100 pounds), down from 4.8 million quintales the previous season.
Medina said the production of 4.8 million quintales requires 73 million labor-days, or roughly half a million jobs. When the crop shrunk from 4.8 million to 4.08 million quintales, the industry lost 10.3 million labor-days, or about 70,000 jobs.
That, he said, translates into $120 million that wasn’t paid in wages.
“Not only were those days not used, it means that money did not circulate in rural areas. This is hurting not only people who work directly in coffee, but those who indirectly live from the industry as well,” he said, noting that coffee is Guatemala’s biggest employer, providing jobs for 1.1 million people or 18% of the country’s active working population.
Yet coffee rust threatens the industry’s future. The fungus has been around for years but only recently has become more aggressive, likely due to climate change, since it thrives in hotter weather. It’s already caused more than $1 billion in Central American crop losses; in Guatemala alone, some 100,000 jobs have disappeared as a result.
At the same time, Guatemalan President Otto Pérez Molina has authorized a 5% increase in the national minimum wage, effective Jan. 1. Since 70% of the cost of coffee is labor, said Medina, that automatically pushes costs up by 3.5%.
Medina said Guatemala and neighboring Honduras have controlled coffee rust considerably better than Central America’s two other leading coffee producers, El Salvador and Costa Rica. In the case of El Salvador, production fell from 1.9 million 60-kilogram sacks in the 2010-11 season to 500,000 bags in 2013-14.
Likewise, Costa Rican production plummeted from 1.38 million sacks in 2011-12 to roughly 500,000 bags in 2013-14.
In 2011-12, some 45% of Guatemala’s coffee exports went to the United States. Another 27% was shipped to Europe, 16% to Asia and 8% to Canada.
“I think one of our best chances will come from renewing the oldest plantations, so that younger, more vigorous plants will take the fight against roya, and not old and weak ones,” Ligorría explained. “That requires a lot of investment and a longer period of time, since you cannot renew all coffee zones at once.”
Despite the crisis, Ligorría said the 2014-15 season is likely to show a slight improvement to 4.2 million quintales, thanks to new plantings as well as the pruning of older coffee trees that are starting to produce.
“On the income side, we think we will have a decrease, since last year’s average price was around $2.10 per pound and today, prices are $1.70 per pound at the moment,” the ambassador told us. “Remember that the coffee sector is Guatemala’s biggest employer, and that 70% of the cost of coffee comes from labor. Therefore, lower prices mean less ability to fertilize, and thus less crop to be harvested at the end of the year.”
Volumewise, Guatemalan coffee reached its peak in 2011-12, when its farmers produced 4.8 million quintales worth $986 million. The year before that, 2010-11, volume was slightly less, at 4.7 million quintales, but thanks to high prices those beans generated a record $1.14 billion in foreign exchange. Pricewise, the worst season was 2005-06, when coffee brought in only $463.4 million.
Anacafé says the extent to which coffee can recover depends largely on growers being able to get proper financing. But that in itself has become a bureaucratic nightmare.
Medina said the government last year approved a funding mechanism that was aimed at injecting $100 million into the Guatemalan coffee sector. Of that total, $52 million was in the form of loans at interest rates of between 8% and 11%.
However, he said, “people weren’t taking advantage of the program because the rates were too high, and because it was supposed to finish in 2016. Nobody in the coffee sector is going to take out a high-interest loan that you have to pay back in two or three years.”
Following intervention from Anacafé, the program was extended to 2026 and interest rates were slashed to 2% for small producers and 3% for medium and large-scale producers. But in the meantime, the government had allocated the remaining $48 million in the kitty to pay for roads and other infrastructure.
“They used the money that was supposed to fund the coffee sector. Banks have authorized loans for $32 million and coffee producers are waiting to invest in their plantations, but the government is now offering them only 10 million quetzales (about $1.5 million),” Medina said. “This makes a mockery of the coffee business.”
Last summer, Starbucks and Green Mountain — two major U.S. buyers of Guatemala’s prized arabica coffee — teamed up with the U.S. Agency for International Development, reported NPR.com. Together they have pooled more than $23 million to offer financing to repair crops and fight the scourge.
“Rust is something that can be prevented, but it cannot be totally eradicated,” said Medina. “We have an alert system that we’ve been developing through two methods: meteorological stations all over the country, and technicians constantly monitoring the severity of rust in farms, as well as weather, temperature, rain and relative humidity. That way, we can decide if we think a certain area needs to be sprayed with fungicide sooner than we were recommending.”
Last June, Medina’s association unveiled a new variety, Anacafé-14, which is a hybrid between the Pacamara and Catimor plants.
“It’s very productive, rust-resistant and has a big cup quality, so we’re recommend planting it in the places where rust is most likely to appear and at lower altitudes,” he said. However, Medina does not suggest planting such varieties at altitudes exceeding 4,000 feet.
The Anacafé chief is also wary of engaging in widespread planting of cultivars that are resistant to rust, such as Caturra or Castillo, the latter being the clear favorite in Colombia.
“In the 11 years the Cup of Excellence has been running, we haven’t had one single Castillo win. They aren’t horrible, but when you compare it to other coffees in the same place, normally the non-rust resistant varieties will grade higher. This is consistently the situation.”
He added: “We’re very worried that if we were to turn only to rust-resistant varieties, it means we’d be relying on one single gene to protect ourselves. Rust-resistant varieties are more prone to be attacked by another fungus, and in the moment when the rust mutates and it can attack rust-resistant varieties, that gene will be able to attack all of our plantations. I think it’s very risky to tell everyone to plant one single variety.”
Medina noted that all rust-resistant varieties are prone to leaf spot disease, which isn’t as dangerous as roya — nor is as easily spread. However, he said, “it’s also a problem in that Guatemala has been promoting excellence, and it would go against ourselves to start promoting lesser varieties.”
Asked if there’s a link between Central America’s continuing coffee crisis and a dramatic spike since early 2014 in the number of unaccompanied minors from Central America to the United States, Ambassador Ligorría said absolutely yes — and that Guatemala’s troubled country’s coffee sector needs more outside assistance immediately.
“There is certainly a relationship, though not yet fully identified. But it is here where the Alliance Plan for Prosperity has one of its most solid arguments,” he said, referring to the ambitious regional economic development program proposed in Washington last November by the presidents of El Salvador, Guatemala and Honduras. “We need to build and diversify employment opportunities, improve social conditions and systems of justice and management — and we hope to achieve all this with the plan.”