Weekly Coffee News

MARCALA, Honduras (Reuters) – In the small town of Marcala in the western mountains of Honduras, farmers are harvesting more coffee than ever before, part of a nationwide push to capitalize on higher prices that has doubled production in less than 10 years.

But the boom comes with a cost.

The coffee is coming in faster than growers can handle it and they are running out of space to dry all the beans, which need time in the sun or in drying machines to stop fermenting.

Improper drying can ruin coffee for export. A drastic reduction in quality will slash the price the coffee can fetch.

Local coffee company Cafe Organico Marcala (COMSA) was forced to rent out a nearby soccer field this year and cover it with plastic sheets to air out coffee cherries after their cement-drying patios overflowed.

“We’ve had an avalanche of coffee,” COMSA’s manager Rodolfo Penalba said, as workers raked beans over the plastic in neat rows. They survived this year by using the tarp but next year’s harvest would be even bigger, he added.

Right now Honduras only has around a dozen big coffee processing centers in larger cities or near export ports and around 20 smaller centers in more remote coffee regions.

“Honduras doesn’t have the capacity to dry all the coffee coming in 2011/12 in an efficient way, and even less so for what’s coming in 2012/13. This is going to lead to losses on a national level if the beans ferment,” said Eduardo Aguilar, the vice president of the Honduran coffee traders’ association.

The problem hit a peak at the height of the harvest in January and February when coffee cherries were ripening in several regions of the country. The industry is hoping the government or development banks will provide loans to help the sector ramp up infrastructure.

Honduras will export nearly 5.4 million 60-kg bags of arabica coffee next season, well over double the volume in the 2004/5 cycle, cementing the country’s position as the region’s biggest coffee producer.

It is the only country in Central America that is significantly increasing production, aside from Nicaragua, Central America’s smallest producer.

Unlike most of its neighbors, Honduras enjoys inexpensive land prices, keeping the coffee business attractive in an economy heavily reliant on agriculture and textiles.

Costa Rica, with a stronger tourist-based economy, has seen farm land shrink, gobbled up by condos for vacationers and American retirees.

Honduras is now tied with Mexico for a spot at the world’s No. 3 arabica coffee producer after Brazil and Colombia, according to the U.S. Department of Agriculture.

But if Honduras cannot improve infrastructure fast enough, quality could fall below standards demanded by exporters.

Improper drying affected between 230,000 and 383,000 60-kg bags of coffee this year — 5 to 8 percent of the crop, according to producers and traders. Some of this coffee could not be shipped abroad and went instead to local consumption, local industry officials said.

Several dealers said mold has been found in Honduran beans.

“There have been some quality issues,” said one U.S. importer, who declined to be named. “It’s an issue but I don’t think it’s affecting everything. They’re catching it at the certification process.

The problems may be hurting prices. The average price differential for strictly high grown Honduran coffee sold in the United States dropped in the first week of May. The differential, which helps to gauge a bean’s quality and availability, fell to 5 cents over the ICE Futures U.S. benchmark coffee contract, from 5.5 cents a week earlier.

BAD REPUTATION

This has complicated efforts by Honduras to boost its reputation as a producer of higher quality coffee. It hopes to compete with its neighbors Guatemala and Costa Rica, which can fetch higher differential premiums for their gourmet beans.

“Honduras has traditionally been a lower-priced exporter,” said Jack Scoville, a commodities analyst at The Price Group. “Their quality has been considered a little lower but they are working very hard to change that image.”

“Now they are producing a lot more coffee and I haven’t heard of many new (coffee processing facilities) being built just yet, so that could be an issue going forward,” he said.

So far, Honduras has not had problems finding buyers, said Scoville. Increasingly roasters are scouring for lower-priced options, or even turning to cheaper robusta beans.

“I think you are seeing the market chase lower quality,” Scoville said. “Honduras will be able to sell.”

MORE FARMERS, MORE LAND

The world’s growing thirst for coffee boosted prices here to a level that has inspired growing ranks of economists, doctors, lawyers, engineers and other professionals in Honduras to swap their ties for coffee baskets.

There were 101,489 coffee producers in Honduras last year, up from 92,706 in the 2009/10 season, the national coffee institute said. The country has added nearly 27,000 acres of new coffee-growing land.

In May 2011, ICE arabica futures hit a 34-year peak at $3.0890 per lb. They have since dropped about 40 percent, hitting a 19-month low on Monday at $1.7360 per lb. But the slide has not deterred farmers here.

Some 85 percent of farmers in Honduras scrape out a living on tiny plots they cannot afford to abandon even if prices fall.

“The price has gone down but it is still competitive for us,” said IHCAFE’s technical manager Mario Ordonez.

Coffee cultivation has spread to most of the country and the industry is scrambling to improve infrastructure.

Officials said the national coffee institute IHCAFE wants to launch projects that would give government financing and loans from regional development banks to farmers to buy drying tools.

Each drying machine can cost up to $70,000, said coffee machinery vendor Juan Osorto. “People who have been able to get financing are buying drying equipment since there is so much more coffee,” said Osorto, who so far this year already sold 25 driers. Each can process 153 60-kg bags at a time.

Similar schemes have worked in Brazil and Taiwan. IHCAFE director Victor Molina says the help could boost the country’s processing capacity by 1.5 million 60-kg bags by adding 135 new facilities, complete with electric drying machines, and some 12,000 smaller, solar drying units.

Representatives from IHCAFE traveled to Brazil to drum up support from Brazilian lenders to purchase mechanical driers.

“We need government help,” Molina said. “We are going to do everything possible so that we don’t lose out.”

(Additional reporting by Mica Rosenberg and Marcy Nicholson; Writing by Mica Rosenberg; Editing by David Gregorio)

Copyright © 2012, Reuters

14th May, 2012

Coffee connoisseurs will tell you that in Peru, the world’s seventh largest coffee grower, the high altitudes, Pacific Ocean winds and alternating periods of rain and sunshine provide the perfect growing conditions for the delicate Arabica coffee bean. Coffee growing is a central part of life for the 6,600 smallholder coffee farmers who make up the Cepicafe cooperative in the northern Sierra Piura region. Here, farmers tend to small plots of up to five hectares, their land and shade-grown coffee farming traditions passed on generation after generation.

But Mother Nature can be unforgiving. Heavy downpours and flash floods that lead to landslides, and at the other extreme, high temperatures and drought are wreaking havoc on coffee farms across the region. Farmers like Angela Santos Tocto, 60, who has looked after a two and a half hectare plot in Canchaque village all her life, are facing new and complex conditions. ‘As a grower, I know everything, inside and out. The weather is affecting us,’ she says. She harvests an average of eight ‘quintals’, the 57.5-kilo sacks of unhusked coffee beans, on the same land that used to give her father 20. ‘The worst year brought a yield of only three quintals. This was real scarcity,’ she says.

Another Canchaque farmer, Alexandre Reyes, 57, literally grew up with coffee. ‘When I was eight or ten, I learned coffee growing from my parents. There were lots of trees in the mountains. It was colder, fresh. Now when the rain comes, it is still hot. The weather is changing, we need to adapt, but there is a lot we don’t understand.’

During the Ecologist’s visit to Canchaque and San Miguel del Faique villages, many farmers described how unpredictable weather, including rains 500 per cent greater than normal, has left them defenseless. Winding up a treacherous, dirt road 1,100 metres above sea level en route to Canchaque, the effects were visible in the rope and pulley system (pictured below) built three years ago to carry schoolchildren and provisions across a river when the flash floods and ensuing landslides make road crossing impossible.

A growing concern

Peru is among the group of countries that will be most affected by climate change, according to the UK’s Tyndall Centre for Climate Change. It can always be argued that specific extreme weather events aren’t directly connected to climate change, but proof of cause and effect is a moot point for these small farmers who can’t afford the luxury of climate change scepticism. Peru’s Vice-President Marisol Espinoza told the Ecologist, ‘We are already living the effects of climate change. We’ve experienced massive landslides and flooding along the coastal regions as well as in the mountains. It’s happening in the here and now. This is not about criticizing, but about proactively coming up with responses and solutions to tackle climate change that address the issue for the poor and give them a way forward’.

Ninety per cent of the region’s coffee is for export, which means the implications on the global market, were unlikely to go unnoticed. The question is how international coffee buyers are prepared to respond to climate change related impacts on the world’s second most traded commodity after oil.

Cafédirect, the UK’s leading Fairtrade coffee brand, has worked with the Cepicafe cooperative since 2001. Founded in 1991 by Oxfam, Traidcraft, Equal Exchange and Twin Trading, Cafédirect’s unique owner structure means the 39 producer organizations it works with in 13 different countries are represented on the board and have shares in the company. While most of the world’s coffee farmers sell to middlemen, or brokers at coffee auctions, who, in turn, profit from selling on to multinational companies, Cafédirect works directly with growers.

Wolfgang Weinmann, head of sustainability at Cafédirect, says, ‘In 2005 and 2006, during producer group meetings, I would hear a lot from our [coffee, cocoa and tea] growers about weather related issues – from drought, to desertification, to flash floods. We will never be able to predict exactly the impacts, but climate change is happening for them now. This is about decreasing the vulnerabilities and strengthening their capabilities to adapt.’

Climate data about the Piura region predicts that some parts of the area will not be suitable for coffee growing in 20 years time. ‘A scientist would say, “So what you just move up the mountain, it’s cooler. Grow the coffee there”. No, from an environmental point of view, you should not do that. The highlands are more fragile. In most cases, they are still uninhabited. The bigger picture is about the wider water management,’ says Weinmann.

In 2006, Cafédirect set up a three-year programme aimed at responding to grower concerns with pilot projects with four of their growing partners, including Cepicafe in Peru. The project, ‘Adaptation to Climate Change for Smallholder Growers’, (AdapCC), includes site-specific climate adaptation methods and a carbon credit reforestation project designed to buffer the coffee farms against heavy rainfall and landslides up mountain.

Climate adaptation brings changing traditions

According to the Smallholder Coffee Association (Junta Nacional de Café), there are around 150,000 coffee smallholders in Peru. Everything from coffee picking, sorting and milling is done by hand. A radical departure from tradition such as the Brazilian method of sun grown coffee on large plantations using chemical fertilisers and heavy machinery, is neither possible nor desirable. Coffee is a quality market, and being organic smallholders with a hand picked premium coffee bean helps ensure differentiation in a competitive market. Luis Torres, Cepicafe’s Project Manager on AdapCC, says, ‘We can’t compete with Brazil in quantity but we know our quality is good.’ Vice President Espinoza refers to Peruvian coffee’s unique ‘aroma of justice’ because of its link with community development.

In Canchaque, farmers learn adaptation methods through a ‘talking map’, a colourful, hand drawn visual aid illustrating how the weather changes have affected the coffee farms. Paul Santos Santos, 24, a young farmer turned community organiser trained to pass on technical assistance, sings a song he’s written about the community’s coming together to face the dual threats of drought and heavy rains.

‘We could see the changes, but we didn’t know what to do about it,’ he says.

Support from the AdapCC project has enabled coffee farmers to invest in rain-fed irrigation systems to provide water during dry spells and methods to stop soil erosion on steep hillsides. In the village of San Miguel del Faique, the most significant result has been to repair a water reservoir (pictured below).

‘In the past we had complete fields infested with the coffee borer, it was too hot,’ says Alexandre Reyes. They now use biological pest traps: plastic water bottles cut in half with coffee essence inside, used to attract pests, which then drown.

Coffee is an understory crop, shade trees buffer against high and low temperatures. In Canchaque, coffee plants are interspersed amongst banana, Roble and ‘cedro rosado’ (hardwood,) canopy trees. Hundreds of new shade trees have been planted as part of the project. ‘But we know that too much shade means more pests, so we prune our shade trees,’ says Paul Santos.

When the Ecologist visited, coffee cherries were just starting to turn colour – from green to the deep dark red that means they are ripe. The coffee cherries are hand picked and sorted then poured through a ‘popping machine’ where they are pulped, leaving two white beans from each cherry.

The future of coffee growing in the Sierra Piura region depends in part on adaptation projects such as AdapCC. Cafédirect’s project represents a new start in corporate practice to protect smallholder coffee growers around the world. Cafédirect say climate change adaptation should be a boardroom agenda for all major coffee retailers. Vice President Espinoza says, ‘I think [companies] can’t be just spectators to what is happening, they will have to contribute to find solutions to climate change

Matilda Lee

(Reuters) – The latest retreat in arabica coffee prices signals the tightly supplied coffee market is not running out of beans yet, but the outlook for sub-optimal harvests and faster consumption indicate that by next season it could come close.

A tour of coffee areas in the world’s top arabica grower, Brazil, showed a good but sub-optimal crop on the way. But in Colombia, output has dropped sharply and poor harvests have become almost a chronic problem.

On the demand side, things remain tight, with stocks in the United States and Europe totaling just about a month’s worth of global demand.

Despite the tight market, prices of coffee futures on ICE have been hovering near a 17-month low hit on March 12.

“There is a bit of supply available but you have a deficit year coming so we have to be awfully careful here and not be too bearish,” said Eric Nadelberg, Senior Vice President at Jefferies Bache, LCC in New York. “There is not a lot of coffee and as we move forward this will become more acute,” he told Reuters.

Despite record exports last season, European stocks of arabica and robusta are at their lowest since 2005/06, as consumers down more cups. Stocks there stood at just over 10 million bags by end-December, with 4.2 million bags in the world’s top coffee consumer, the United States, at the same time.

There have been two schools of thought over how coffee’s fundamentals will influence the price of arabica beans — more expensive than robusta. Arabicas are typically roasted and ground for brewed coffee while robusta is used in instant coffees or in blends with arabica.

Coffee market bears focus on expectations of a large Brazilian crop. Bulls point to the series of ever-smaller crops coming out of Colombia and other arabica producers in Central America and East Africa, a trend likely to continue.

On top of that, low certified arabica stocks at New York’s ICE exchange which remain close to their lowest in 11 years at around 1.6 million bags.

Until now, the bears have dominated, as the benchmark arabica contract trading on ICE Futures U.S. is down more than 40 percent from its 34-year high at $3.0890 per lb, reached in May 2011.

Nadelberg takes the view that the market will rally as production lags demand in the United States and Europe.

“We have a deficit year and we should trade higher coming into the main roasting season again. I look for it to get tight coming back to about the 3rd quarter, and by the 4th quarter the market should rally back,” he said.

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Brazil coffee output from 2000 link.reuters.com/ruw85s

Graphic on Colombia harvests: r.reuters.com/zad78r

Colombian production, exports: r.reuters.com/wet48r

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COLOMBIA’S “WORST CROP EVER”

Better weather could have made the difference between a good and a great coffee crop in Brazil and put Colombia back on track after a run of poor crops. A few million bags more from both would have left the market much more comfortably supplied.

Brazil’s is “not going to be the mother of all crops,” said John Wolthers, a veteran coffee trader with exporter Comexim in the main port town of Santos. Comexim’s crop estimate is among the highest of its private sector peers at 55.8 million bags.

Two damaging spells of drought during the critical flowering phase and again as beans were filling out, were enough to kill off hopes of a bumper or record crop.

The 2012/13 harvest comes in a so-called ‘on year’ in Brazil’s biennial cycle which causes output to rise one year and fall the next as trees recover. That is why producers are using the 2010/11 harvest as the comparative reference for this crop.

The Brazilian government’s crop agency, Conab, forecasts the crop at a median 50.6 million 60-kg bags while private forecasters see between 52 and 55 million bags, less than that picked in 2010.

Conab’s number comprises of 37.7 million bags of arabica beans and 12.9 million bags of robusta beans.

In Colombia, little improvement is seen after four harvests in which output was suppressed by heavy rain, leaf rust and pests, negating the effects of tree renewal programs.

“The harvest is not good, we continue to have many problems and in the best case we may get as much as last year,” said producer Hernan Castillo. The mitaca or mid crop in the 2010-11 cycle was one of the smallest in the last 50 years in Colombia.

A drive through the La Union coffee region confirmed reports from a Colombian Coffee Federation representative that many producers had uprooted and replanted trees afflicted by rust disease. The fungus weakens trees which lose foliage and it has spread at an alarming rate in some southern provinces of late.

“This is the worst crop ever. The main crop is gone, and the mitaca is bad, so as far as the 2011-12 coffee year is concerned it’s going to be hard for Colombia to get to even 7.5 million bags,” said a trader with a large exporter in Bogota.

Prior to its current problems Colombia used to produce between 11 and 13 million bags – a now-elusive level coffee importers have mourned ever since.

Easing coffee prices which could boost consumption further still and the certainty of a smaller Brazilian crop in the following 2013/14 crop year offers little reassurance that an awry supply and demand balance will invert any time soon.

“It’s a difficult situation,” Jeffries Bache’s Nadelberg said.

NARANJO, Costa Rica—Coffee producers in the heart of this region that grows top-notch beans learned a tough lesson in 2001, the last time prices sank: Even gourmet coffee can leave a bitter taste.

This time, they are better prepared. Prices of arabica beans, the kind coveted by connoisseurs for their mild taste, have hit 17-month lows. Rather than spending their profits on luxuries like new cars and the latest electronic toys, as many once did, growers from Costa Rica to Mexico to Colombia are diversifying to protect themselves from cyclical declines like this one.

The efforts of some Latin American farmers to lessen their reliance on coffee has pinched supplies of high-end arabica, which undergoes a rigorous and labor-intensive washing process, even as global demand has increased. Consumers in emerging markets are thronging coffee shops in increasing numbers. Without a sustained increase in output from Latin America, the biggest source of these sought-after coffee beans, a shortfall could develop, setting the stage for a rebound in prices over the longer term, analysts say.

ReutersGrowers in Latin America are diversifying to protect against cyclical declines. Above, a harvest in Costa Rica.

Robin Rosenberg, an analyst at PFG Best, expects coffee prices will again hit $3 a pound over the next two years, as a supply deficit emerges. “Prices are going much, much higher,” Mr. Rosenberg said. “But it may not be next week.”

Since hitting a near record of $3.09 a pound in May 2011, coffee prices have plunged on expectations of a bumper crop from Brazil, the world’s biggest coffee producer but not a traditional heavyweight in “washed” arabica. On Thursday, coffee prices rose 0.9%, to $1.8445 a pound.

Here in the Naranjo region, in Costa Rica’s central highlands, Raul Herrera has been using profits from last year’s high prices to plant banana trees among coffee plants. He also planted laurel trees to sell firewood and built a tomato-plant nursery.

“The idea is that when prices go down, I’ll maintain a certain amount of income to sustain myself,” Mr. Herrera said.

Mr. Herrera grows washed arabica beans on about 45 acres. He couldn’t afford to maintain his plantation in the early 2000s when prices dropped. So the shade trees protecting the coffee plants became overgrown, stifling the plantation and causing a shade-loving fungus to damage half of his plants.

Latin American growers of the premium beans still bear the scars of 2001, when arabica prices hit an all-time low of 41.5 cents a pound, one-eighth the price only four years earlier. At the time, some growers in this region abandoned unprofitable fields or gave up altogether, with many migrating to nearby cities and the U.S. to find jobs.

Near the region of Naranjo, sprawling urban developments have taken over some of the best coffee land since then. Other former coffee-plantation land, high in the mountains where the soil is rich in volcanic minerals, remains overgrown with weeds and contains barren trees.

In the past decade, Costa Rica went from producing 2.3 million bags of coffee each growing season to 1.5 million bags, and the number of acres cultivated with coffee dropped from 247,000 to 212,000 or less over that time, said Ronald Peters, the president of the Costa Rican Coffee Institute.

Now, as production slowly recuperates, many producers who abandoned farms and returned, and others who remained, are determined not to put all their beans in one basket.

Instead, they are diversifying their incomes by planting crops such and corn and launching side businesses such as coffee tours and shops. Many of them also have signed up for certification programs, which require the farmers to live up to certain environmental and labor standards. For farmers, the main benefit of being certified is a guaranteed minimum price for their beans.

“They’re definitely taking action to insulate themselves if prices go down,” said Jack Scoville, vice president of Price Futures Group, a brokerage firm.

The trend cuts across Latin American countries that depend on washed arabica beans, which require subtle growing techniques and processing, and are the type nearly always used in gourmet coffee.

In Mexico, Cirilo Elotlan Diaz, president of the Regional Coffee Council of Coatepec, said 70% of the area’s producers abandoned their plantations from 2001 to 2004. “Some of them went to the U.S., others went to work in the cities,” he said.

But many of them have come back. Fernando Celis, an analyst at Mexico’s National Committee for Coffee Organizations, said some have begun growing corn and other grains.

“We have more options now and more certainty,” said Gabriel Barreda, president of Mexico’s National Union of Coffee Growers.

The Colombian Coffee Federation said its country’s high-end growers have begun planting corn and other crops as a way of diversifying incomes, and that most have been reinvesting by replacing old coffee plants with newer, more productive ones.

In Costa Rica, Jose Antonio Vera, head of sales and exports for Coopronaranjo, a cooperative with 2,000 producers, said that in recent years it has launched two supermarkets and a roasting mill where producers can grind their own coffee and sell at a greater value than their beans.

Coffee producers also are taking advantage of the fact that their plantations are often in scenic areas visited by tourists. Coopronaranjo started a coffee tour five years ago that draws hundreds of foreigners a year who each pay $22 to visit Espiritu Santo, an old-fashioned hacienda several hours from the capital of San Jose, to take part in the harvest and participate in coffee-tasting classes.

“There was a time where the producers had to choose between feeding themselves and feeding their coffee,” Mr. Vera said. “So they neglected the plantations. It’s good that in these moments that prices are good, they’ve changed their mentality and culture.”

Rwanda’s coffee production may climb as much as 20 percent to 24,000 metric tons this year because of good weather and a high yield, the state-run National Agricultural Exports Board said.

Output may rise from 20,000 tons last year, Robinah Uwera, the agency’s marketing director, said today by phone from Kigali, the capital.

“This year we expect bigger production because of a high yield crop cycle and good weather,” Uwera said. “The cycle alternates such that when you have a good yield this year it falls the following season.”

Harvesting in the central African nation, which produces mostly arabica beans, started last month, she said. The country exports more than 98 percent of its crop, according to the Eastern African Fine Coffee Association.

The agency had targeted output of 40,000 tons for 2011 two years earlier. The sector failed to meet the projection because of insufficient production of coffee cherries and weak management, the agency said on its website. The East African region had the worst drought in 60 years last year, which also affected agricultural ouput.

Coffee and tea are Rwanda’s major crop exports. The nation earned $75 million from coffee bean shipments in 2011, compared with $56 million a year earlier, because of improved global prices, Uwera said.

Coffee prices fell Friday on expectations that Brazilian growers will produce a bountiful harvest later this year.

Coffee for May delivery fell 2.95 cents to finish at $1.8235 per pound. The price has fallen 19.3 percent this year on the prospect that global inventories could expand.

Sterling Smith, a market analyst at Country Hedging LLC, thinks that the price could fall into a range between $1.65 per pound to $1.70 per pound, but noted that could be offset by strong overall demand.

Despite the falling futures prices, consumers aren’t likely to get a break at the retail level because manufacturers are paying higher costs to produce and ship their products, he said.

NEW YORK/LONDON, March 7 (Reuters) – Arabica coffee futures plunged on Wednesday to a 16-month low on investor liquidation and suspected producer sales as the market posted its biggest three-day fall in a month.

The rest of the softs complex was mixed, with robusta coffee deriving support from the fact that growers in top robusta producer Vietnam were holding back supplies. A large crop in top producer Brazil also weighed on the market.

Some dealers believe the Vietnamese action is longer-term bearish because those beans will eventually have to come to market and they also point to a revision of the Indonesia’s coffee crop, which is due to start harvesting in April, to 9.2 million bags from an earlier forecast of 8.75 million.

The key May arabica coffee contract dropped to a session nadir of $1.862 a lb, lowest for the second position in the market since mid-October 2010, Thomson Reuters data showed.

May fell 4.45 cents or nearly 3 percent to close at $1.886 per lb.

London’s May robusta futures jumped $76, or nearly 4 percent, to finish at $2,031 a tonne, the highest close for the contract in 1-1/2 weeks.

“Part of it had to do with the market going through (the psychological level of) $2,” said The Price Group senior analyst Jack Scoville, adding pre-placed computer sell orders accelerated the fall in bean values.

James Cordier, chief trader of commodity brokerage Optionsellers.com in Florida, said he suspected “heavy” producer sales hit arabicas as Brazilians wary of a weakening economy opted to turn their assets into funds.

“They want to turn their beans into cash,” he said. “Brazil has been sitting on a lot of coffee.”

Traders said roaster interest should begin emerging at these levels. Cordier believes a floor near $1.80, basis May, is likely.

ANTIGUA, Guatemala – North Americans and Europeans have enjoyed coffee from Ethiopia, Costa Rica and Vietnam, among others, in their local coffee shops for decades. Coffee is a culture – in the United States, sitcoms like “Friends” and “Seinfeld” were based in coffee shops. So it’s peculiar to walk into businesses in a coffee-producing country like Guatemala and get sugary instant coffee. But it’s been this way forever.

“Even coffee plantation owners drank instant coffee, … the business was producing, not consuming,” says Francisco Palarea, editor of Café Cultura, a coffee magazine focusing on the industry in Guatemala and El Salvador.

Historically, producer countries are not consumers of specialty coffee. The best beans are shipped to the U.S., Europe and Japan, where cheap raw coffee fruit is turned into expensive roasted beans. But in recent years, Palarea says that local cafés here, like Café Barista and El Cafetalito, are giving many Guatemalans a chance to drink their own world-famous coffee.

“[Guatemalan coffee chains] are the movers in creating a coffee-consuming culture in a coffee-producing country,” he says.

The arrival of Starbucks, which opened two locations in Guatemala last year, shows there is demand for specialty coffee. Starbucks has recognized the slow success that local coffee chains have had and are following it. On many afternoons at new Starbucks locations, customers wait in line for 15 minutes and can’t find a seat.

Some evidence supports the claim that consumption is up: Domestic coffee consumption in Guatemala has doubled in the last five years, according to a U.S. Department of Agriculture annual coffee report.

Palarea believes the trend can bolster the economy of Guatemala, a country where more than half of citizens live below the poverty line. “Coffee-consumption culture in a coffee-producing country can help improve the country in many ways,” he says.

Up to 1,000 people are involved in each cup of coffee, Palarea says, from farmers and exporters to roasters and baristas. When coffee is produced locally, this could mean 1,000 jobs in Guatemala. The benefits of more coffee consumption could trickle down and help the country.

Still, most Guatemalans aren’t yet feeling the benefits of increased consumption. With 52 percent of the population still living on less than $2 per day, purchasing a cappuccino for $3.50 at Starbucks is impossible.

Many Guatemalans involved in production don’t feel any of the benefits either. Small farmers are still at a huge disadvantage, says Franklin Voorhes, director of As Green As It Gets, a nonprofit group that supports small coffee farmers in Guatemala.

“There has been no change at all in the coffee industry,” he says.

Traditionally, Guatemalan farmers sell their raw coffee fruit to others who process it into expensive, roasted beans that end up in a customer’s cappuccino. “Even if [the farmer] only values his time at minimum wage, coffee fruit is sold at a loss,” says Voorhes.

And specialty-coffee premiums rarely reach the farmer. “The guy next to the customer is able to keep raising the price [of a cup of coffee], but it never trickles down to the farmer,” he says.

This is not unique to Guatemala. “Go to Honduras, Nicaragua, Kenya, the story doesn’t change,” Voorhes adds.

Voorhes wants small farmers to take control of each step of the coffee process.  Timoteo Minas, a 46-year-old father of six who has been a farmer since he was 10 and growing coffee for the last 20, tried it eight  years ago. He got a starter loan and learned every step of the process to harvest his 15 hectares of coffee trees, from planting the seedling to roasting the beans.

“The first year was very difficult,” he says. “I worried that I wouldn’t do it right and that when it got to the customer, it would be bad.”

But by his second year, Minas was confident. He says his final beans are much higher quality now than when he started.

Minas is now involved in exporting and sales. Despite receiving only four years of formal schooling, he acts as the accountant for his cooperative. Most of the time, coffee farmers deal with local buyers and never know where their product ends up. But on some occasions, a buyer comes to Guatemala to put the check directly into Minas’ hands, the same hands that planted, picked, washed, dried and roasted the beans.

Each step of the process makes the beans more valuable when done correctly. Minas says he earns much more now than he ever did before. “The time I invest in the process is paid back when it’s sold, and then some,” he says.

Minas has invested his higher earnings into more land and school for his children. So far, the older ones have all finished secondary school.

While Minas has been successful, the 300 small farmers like him who work with As Green As It Gets are very rare – they produce less than a third of 1 percent of Guatemalan coffee.

And Minas has an advantage because he produces in the Antigua region, recognized internationally for its coffee. Especially in areas with less notoriety and tourism, changing the way small farmers produce coffee is not easy – harvesting coffee is a delicate process and a long-term endeavor. Trees don’t bear fruit for the first five years and some varieties can produce for more than 100 years – once you start, it becomes very expensive to stop.  This makes many farmers hesitant to change the way their ancestors produced coffee.

Still, more Guatemalans like Minas are learning to appreciate their own coffee. Before, he didn’t drink his own coffee and didn’t know where it ended up. Now, he says, “I like a light roast, sometimes a dark. I usually drink it as an Americano

BRANDON HILL, Jamaica (AP) – A few years ago in this mist-shrouded mountain town, steep slopes were quilted with some of the world’s most valuable coffee trees. Farmers scrambled to increase acreage and pickers painstakingly filled wooden boxes with ripened berries at harvest time.

Today, much of the terrain is overgrown with underbrush and bamboo as a declining luxury market in Japan and a voracious beetle drive thousands of frustrated small farmers away from tiny plots of leased highlands.

Times are hard for the growers of Jamaica’s legendary coffee, especially those on isolated, low-tech farms such as the ones in Brandon Hill, a one-road enclave with no traffic lights.

“We used to make a living, but now we’re working hungry,” said Colin McLaren, standing in his sloping farm of flowering coffee trees in Jamaica’s wild eastern mountains, where his father grew the gourmet arabica beans before him. “It’s tough and getting tougher.”

Jamaica produces what connoisseurs rank as one of the world’s finest coffees, mostly grown on patches of a few acres between 2,000 to 5,000 feet (610 to 1,525 meters) above sea level. The moist, cool climate of the Blue Mountains lengthens the growing period from five to about 10 months, allowing sugars to develop in the beans that grow inside the berries. Many coffee lovers say the rich brew has a smooth, nutty flavor and a deep, intriguing aftertaste.

The roasted beans often sell for about $40 a pound in the United States, up to four times the price of other gourmet coffees. In Japan, the main market for Blue Mountain coffee, the beans fetch as much as $34 for a 100-gram (3.5-ounce) package.

But consumers are buying less because of the global economic slump. And that has brought declines in purchases by coffee dealers, as well as big drops in the prices paid to Jamaica’s growers. Like farmers everywhere, they get only a small fraction of the retail price after middlemen, processors, shippers, retailers and others take their slices of the pie.

Meanwhile, the cost of producing coffee has soared for Jamaicans as inflation has driven prices for fertilizer, insecticide and wages higher over the last decade and powerful storms damaged their trees. Between 2005 and 2009, the cost of tending an acre of coffee almost doubled, jumping from $3,400 to $7,070.

An increasing number of exasperated Jamaican farmers say they can’t even eke out a bare living growing the specialty crop.

The nation’s Coffee Industry Board says Jamaican farmers received an average of $50.57 for every 60-pound (27-kilogram) box of Blue Mountain coffee cherries they produced during the 2006-2007 season. Last year, they got $28.91.

Over the same period, the price of coffee elsewhere roughly doubled, according to the World Coffee Organization, as consumer demand has risen for mostly inexpensive commodity beans.

McLaren said the problem has gotten so bad that he would accept being paid in fertilizer instead of cash just so he can keep his coffee farm healthy and maintain his investment.

“That’s what it’s come to now,” he said, looking over his mountainside farm from a ledge. “Fertilizer here costs more than a box of our coffee.”

Demand for the island’s coffee has plunged in Japan, where coffee lovers have long paid top dollar for Jamaican beans. Japan used to buy nearly 90 percent of Jamaica’s crop and helped the island develop its brand. Now Japanese importers buy around 60 percent at depreciated prices and have stopped advance payments for green coffee, shifting the costs to Jamaican exporters.

Toyohide Nishino, executive director of the All Japan Coffee Association, said his country’s love affair with Blue Mountain coffee has dulled because even discriminating Japanese consumers are looking for cheaper products at a time of economic stagnation.

“Consumers really have to watch their budgets, and Blue Mountain coffee is an expensive brand,” Nishino said. “So instead of Blue Mountain, coffee from Colombia and Brazil is more popular these days.”

This year, Jamaica is projected to produce just 140,000 60-pound (27-kilogram) boxes of branded Blue Mountain coffee, far below the record crop of 529,704 boxes in 2003. Even in 2004, when Jamaica’s coffee business was ravaged by Category 4 Hurricane Ivan, it managed to produce 236,405 boxes of Blue Mountain coffee.

As some farmers gave up in the lush Blue Mountains that tower over eastern Jamaica, their untended fields exacerbated a problem for those who remained by creating a breeding ground for the coffee berry borer, an invasive pest originally from Central Africa that is a headache for coffee growers around the world.

Officials say some Jamaican farmers could lose as much as half of their coffee crop this year due to the borer, an opportunistic bug smaller than a sesame seed that flourishes in abandoned fields and then spreads to working farms, further diminishing supply.

Industry leaders are distributing about 50,000 sticky traps containing a dab of pheromone that lures the tiny beetles inside, and they’re trying to educate farmers about how to get rid of the pests by hand. The government, meanwhile, is distributing small aid payments to help with fertilizer purchases.

Gusland McCook, advisory officer with Jamaica’s Coffee Industry Board, said the island has to get the borer population down or else its “going to be catastrophic.” And the fall in prices for Blue Mountain beans makes that tougher.

“A true, faithful coffee farmer can deal with the borer, (and) with more storms. But if the big man makes it so he can’t make a living, well, that’s another story,” said Danavan Edwards, a 29-year-old farmer with a plot near McLaren’s land.

Derrick Simon, president of the All Island Jamaica Coffee Growers’ Association, argues that the industry is in trouble largely because it foolishly relied on Japan almost exclusively for years and failed to diversify its markets.

McCook agrees. “I don’t believe we should be looking back with much regret, but we should have been looking forward in a better way. You could say we have been slow to react and look forward and make adjustments.”

Jamaica has been trying to expand the market for Blue Mountain coffee in Europe and the U.S., where adventurous coffee lovers can order it online from several sellers. The Coffee Industry Board also is looking for a toehold in China, where analysts predict coffee consumption will grow.

Prices have edged back up, although they’re still far below what growers used to get. Mavis Bank Coffee Factory Ltd., a major Jamaican processor and exporter, just promised growers a final price of $35.75 for each box they produce.

Not all Jamaican growers face the same hardships. Farmers with a do-it-yourself approach at higher, cooler elevations find they don’t need to spray often for the damaging beetle, which is far more common at lower altitudes.

David Twyman of the Old Tavern Coffee Estate brand cultivates and roasts coffee at his family’s 150-acre property and relies largely on mail order customers in the U.S., Canada and Taiwan who come back year after year.

“We’ve found that once we get people to try our coffee, they will be back,” Twyman said at his lush farm perched high in the mountains perch where he gives tours and steaming cups of black coffee to tourists and other visitors. “Our customers want a more personal connection.”

Kenyan coffee prices rose 1.5 percent at an auction yesterday as the supply of beans declined, the Nairobi Coffee Exchange said.

The average price for all the coffee sold rose to $284.67 for a 50-kilogram (110-pound) bag, from $280.34 a week earlier, the bourse said today by e-mail.

The benchmark AA grade climbed 1 percent to an average $381.16 from $377.27 at the previous sale after supplies fell about 14 percent to 3,949 bags, the exchange said.

The rise in prices was marginal because the quality of the beans was lower and some of the major buyers weren’t active because they had covered their orders, Mansukh Shah, a coffee trader at the Nairobi-based Alanwood Ltd., said by phone.

“Prices were mixed with good grades fetching good prices while low grades attracted low prices,” he said. “Some of the big players weren’t in the market.”

Sales at the auction rose 2.8 percent to 8,117 bags worth $2.81 million from 7,896 bags valued at $2.69 million a week earlier, the exchange said.

Supplies of the beans at the 12th sale of 2011-12 season fell 9.9 percent to 24,702 bags, the agency said.

Kenya harvests the bulk of its crop from October through December, while a secondary crop is reaped from April to June. The nation, whose output slumped 13 percent to 36,629 metric tons in the 12 months ended Sept. 30, from 42,096 tons a year earlier, is yet to make a forecast for 2011-12, Isaac Muchomba, secretary of the Kenya Coffee Traders Association said on Jan. 17.

The following are details of yesterday’s auction in U.S. dollars for a 50-kilogram bag:

Grade          Low            High           Average
AA             257            491            381.16
AB             177            433            307.33
C              157            285            236.68
E              416            431            420.36
HE             198            216            201.74
MH             167            189            180.18
ML             107            128            122.42
PB             221            437            336.92
T              205            240            216.19
TT             218            319            245.53
UG             217            217            217.00
UG1            183            214            201.94
UG2            136            157            149.46
UG3            104            106            104.99