Tue. Jul 16th, 2019

The coffee crisis: there is more than ever, but neither you nor the producers benefit | Economy


At age 73, Antonio Martínez's life kept an unexpected change. A little over a year ago,This coffee producer of the center-south of Honduras had to desist from investing in his farm: he stopped paying and fertilizing, and he lowered the hiring of workers for the cutting season. The closest thing, he admits, to leaving abandoned coffee trees to their fate: if they previously produced 600 quintals a year, now they only yield 200. "The prices are so low that we have no way to sustain them: there is no money for fertilizers and I can not assist them. as they deserve, "he says. It is a vicious circle: the decline in prices leads to less investment, the lower investment leads to lower production and the lower production, sold at increasingly lower prices, end in dwindling revenues.

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To compensate for the loss of income, Martínez bought "two vaquitas", but its profitability is far of what I got only four years ago, when I sold coffee at double the price today and fertilizer and fuel had not yet been fired. His son-in-law, Javier Aguilera, owner of a two-hectare farm in Marcala, near the border with El Salvador, is also about to throw in the towel for the same reasons. "We continue," he says over the phone, "because we have no other alternative and we grow coffee since we were kids, not because it's profitable. We do not know how to do anything else, but whoever earns the money is the intermediary and the exporter. "

Martínez and Aguilera represent the bitterest face of a sector, the coffee grower, despite the sustained growth in demand and the emergence of gourmet coffee shops In the main cities of the world, it is going through the worst price crisis since the debacle almost two decades ago. The future of millions of small coffee growers like them is played these days in three financial capitals thousands of kilometers away from their farms, in the New York Stock Exchange, where despite a very slight recovery in recent weeks the grain trades at minimums of 13 years dragged by the oversupply. The record harvests in Brazil, boosted by a growing technology and a favorable exchange rate, and the brilliant emergence of Vietnam, which in 30 years has gone from being an irrelevant actor to supply almost a fifth of the world's supply thanks to the hand of cheap work, emerge as the main factors of this gap between supply and demand. This year, underlines Erick Quirós, technician of the Inter-American Institute for Cooperation on Agriculture (IICA), will be the third in which the global harvest exceeds the appetite of consumers.

In adversity creativity tends to impose its law. And that imbalance in the market, which has no signs of ending soon - "in many other countries there will be a drop in production in the coming harvests, but it will be insufficient if Brazil continues to grow," says Carlos Mera, of Rabobank- has led to important voices of the sector to propose alternative rates of contribution to New York. "It has ceased to be the benchmark of soft washed coffee and now reflects the price of Brazilian coffee," criticizes the head of the National Federation of Coffee Growers of Colombia, Roberto Vélez, who claims a base price of two dollars per pound as the only way so that producers have a fair income. In recent weeks, there is also the possibility that some of the world's leading exporters will create a cartel, in the OPEC style, to stop the collapse. It would be a relief, above all, for countries such as Honduras or Colombia - for which it accounts for a third of its exports - but its implementation seems remote. And without an increase in the productivity of these small farms, underlined in unison by the specialists consulted, there will be little they will be able to do in an increasingly globalized market.

The other way to success or, at least, to survival, is the one followed by Iván Velásquez, 49, who in 2015 bought a coffee plantation devastated by a disease that has hit the sector hard, rust - which drastically reduces yields -, in Marcala (Honduras) and that manages to sell its specialty coffee at triple the price on the market. Its secret: to bet only on high-quality varieties, a bank of seeds partially immunized against the fungus that causes the rust and the direct relationship, without intermediaries, with its customers, small European roasters. "Whatever happens in the market I have a price for the sale of others. If you concentrate on having a differentiated product, you are doing well, "he says.

An exit to the noise of the pistols

Catalina Oquendo (Mistrató, Colombia)

In other times, down the steep mountains of Mistrato (Risaralda, Colombia), the death of hand of the armed groups fell. In other times - not long ago - in this town located in the western cordillera of Colombia, there were parrots and myrtle trees. 15 years ago, nearly 7,000 people were victims of disappearances and homicides; displaced about 2,000 inhabitants and the entire municipality was declared a victim of the Colombian armed conflict. A coffee town that was left without people to grow it.

They were other times, says Arturo Marín Pérez, member of the Association of High Quality Coffee Producers of Mistrató, Asojardín, which brings together 157 farmers, of which 70% have been victims of some kind and try to export quality coffee as a way to pass that page of the past.

Today's postcard is definitely better. Now, however, the fear of the war was changed by the concern of low coffee prices, which have them reaping at a loss. It is a "naughty" or "mitaca" moment, as the peasants call secondary harvesting, and everyone expects the October harvest; They talk about a frost in Brazil and how the swings of the New York Stock Exchange affect their work.

"The United States is the world's largest consumer and Brazil, the largest producer, and among them two have manipulated prices with the Stock Exchange. I think, ombe, that they let us negotiate our coffee directly with international buyers, "says Marín with his hat on and a perfectly folded poncho over his left shoulder. He was a tailor, he raised his children "in the middle of the war", he already exported his coffee to Japan and now he is convinced of the strength of the association of coffee growers.

He is surrounded by women who support his idea. They are Omaira Cardona, Aleida Parra and Luz Dary Posada, of the committee of women coffee farmers who decided to recover their land and be them and not only their husbands, the owners of the crops. All escaped in some way to the war by the guerrillas of the FARC and the ELN; and the paramilitaries, or saw friends and family die.

In 2017, the Unit for the Victims of Colombia made a symbolic reparation to all the inhabitants of Mistrato and, as part of it, gave them a coffee storage and packing center, which today is managed by young people like Rodrigo Muñoz. They are worried because many young people leave the field and for that reason they created a group of Generational Empalme, which attracts the boys teaching them tasting and barista (a barista is a professional specialized in high quality coffee, who works creating new and different drinks based on the).

"I have the illusion of always dedicating myself to coffee and not going to the city, but the truth is that we work at a loss. One at the end of the year takes the harvest, pays the debts, gets peeled again and so on, "says Muñoz.

The situation is not easy, admit. "Prices go down but fertilizers always go up. Many people are going through difficulties because they have no other income and go into debt to buy their food. To me, sometimes, I want to plant trees on the farm and leave the coffee, "says Omaira Cardona. Leaving coffee for other crops is precisely one of the survival strategies of many coffee growers in Colombia. In other areas, some convert their farms into hotels for tourists.

But while the crisis is passing, the members of Asojardín continue to work on their brand of Arrayanes coffee and are listening to proposals to market it abroad.

The epicenter of the crisis is in the coffee belt, a strip between the Tropics of Cancer and Capricorn where the bulk of production is concentrated. But the impact is asymmetric: Central America, where the majority of coffee plantations are family-owned, is the most affected region. There, the storm is almost perfect: to the price crisis has been added a persistent drought and the disease of rust, an old acquaintance, but in the last five years has struck with special virulence. Both have become one of the factors behind emigration to the United States.

The son of Antonio Martinez was one of those who left everything a little over a year ago, when the crisis was already raging and the chances of getting ahead with coffee were minimal, to go with his family to the North American country. A history that is repeated in other countries of the region such as Guatemala. "The small producer who continues to do so because he has no other, not because it is profitable", summarizes Félix Pozo, technician in Nicaragua Procagica, a regional program to deal with rust. "The producer is the weakest part of the value chain: coffee production has its roots in a colonial system that took advantage of land and low-cost labor to generate raw material that is then processed at the point of consumption" , complete Ric Rhinehart, who just left the address of the Specialty Coffee Association of the USA to command a working group that will look for solutions to the price crisis. "They are mostly small owners with farms of a few hectares, with little or no access to finance and in countries where the infrastructure is underdeveloped."

Beyond the punctual price debacle there is a much more damaging background dynamics for the weakest link in the productive chain: the 25 million families that sell green beans worldwide, 13 of them in the main Latin American coffee countries : Mexico, Guatemala, Honduras, El Salvador, Nicaragua, Panama, Dominican Republic, Jamaica, Colombia, Peru, Ecuador, Bolivia and, above all, Brazil, origin of 37% of the global supply. They are in clear disproportion of forces against the most powerful agents of the chain, "that with a dominant position impose an artificially low price," says Fernando Morales, of Coffee for Change, a platform from which he denounces the situation. Morales illustrates his speech with one piece of information: in June, the price of quotation came to be less than a quarter of what was set by the 1983 International Coffee Agreement-with the figures already adjusted for inflation. "To meet that agreement, the price should now exceed $ 3.6 per pound," sentence.

Radically different is the situation of the rest of the market players, who are either taking a cut from the rejonazo on prices or, at least, they are maintaining their dominant position. The shares of Starbucks, which in the last decade have been installed in every corner of large cities throughout the world, have quadrupled their value in seven years, when the pound of Arabica coffee cost twice as much as today, and Nestlé , the parent company of Nespresso, Nescafé or Dolce Gusto, is worth twice as much as in 2013. Although the cost of coffee is only a very small part of the cost matrix of coffee chains -4%, according to a study of the British market prepared by Allegra Strategies, of which only a minimum fraction reaches the producer, a figure that should make everyone think - unlike what you would expect, the cheapening of the raw material has not been transferred to the final consumer: who seeks his morning dose of caffeine in a cafeteria in Madrid or in Mexico City, it pays exactly the same as when the pound of coffee cost 1.8 dollars, 80 cents more than today.

Inelasticity

The same can be said by the coffee buyer in the supermarket: the price collapse has not reached its cup. "A coffee in any capital costs the same as it did two years ago and, of course, much more than it does 13. And, isolating labor costs and other inflationary factors, the same exercise yields identical results in the purchase of a 500-pack grams of coffee, for example, "says Andrés Musalem, Euromonitor. "It is a very inelastic market: coffee is something that is yes or yes in the family shopping basket of rich countries, and young people take more and more, premium quality: it has become a cool product" , explains Alejandro Cadena, CEO of Caravela, a multinational company dedicated to the export of high quality varieties. Roasters - a hyper-concentrated sector, in which a handful of companies share half the pie - and coffee shops, he adds, raised prices between 2009 and 2015, but they have not gone back down. "If the demand keeps growing, why would they do it?"


A man piles bags of coffee in a cooperative in Sanctuary, in Colombia.



enlarge photo
A man piles bags of coffee in a cooperative in Sanctuary, in Colombia.

Practically all eyes see the origin of the decline in the price of Brazil, a country that would not be what it is without this grain: it turned São Paulo into the national economic engine - the coffee magnates built their mansions on Avenida Paulista, still the main artery- and today it is one of the most diverse countries in the world thanks to the fact that it opened its doors to workers from all over the planet -from Italy to Japan- to replace the slaves brought from Africa in the coffee plantations.

Turned into a great coffee-making power, Brazil is the country that produces the most, exports the most, and consumes the most. Of the crops distributed in some 300,000 haciendas, in recent years around one third of the world supply has come out and their crops yielded 37% more in 2018, up to 61 million bags of 60 kilos. More than half is sold abroad, especially in the US, Germany and Italy; the vast majority, Arabic, the jewel in the crown. Some eight million jobs depend directly or indirectly on the sector, which has continued to expand in recent years.

But what stands out in the Brazilian case is, above all, the spectacular increase in productivity per hectare in the last two decades: more grain is obtained despite the fact that the planted area has been reduced. At the end of the 20th century, Brazil obtained some eight sacks per hectare in the 2.5 million hectares cultivated, now manages to take 30 sacks in each of the 1.9 million hectares planted, according to Lucas Tadeu, Deputy Head of Transfer Technology Embrapa Café, the branch branch of the large Brazilian public agricultural research company.

Investments

Although the first research to improve coffee production in Brazil dates back to the end of the 19th century, the Coffee Research Consortium that now assumes this mission was created in 1997 by some fifty institutions, almost all of them public. Throughout these years, large investments have been made to "adapt the seeds to the different regions, make them more resistant to pests, to give better quality grain and more sophisticated coffee", explains the manager of Embrapa Café. Tadeu is one of the few who rejects, however, that this increase in Brazilian production is responsible for the collapse of world prices because, he explains, "all producing countries contributed to increase world production, Vietnam already produces 31 million bags , and Indonesia 20 million. " The representative of Embrapa Café points rather to "the funds that manipulate the prices in the São Paulo, New York and London (coffee in) exchanges. Five or six large firms "that control the market.

A solution of height

Álvaro Murillo (San José, Costa Rica)

Costa Rica, as in many other fields, has managed to reconvert before the global avalanche that has occurred in the coffee world and its challenge is to give sustainability to the successful system that only benefits a few. The small Central American country, in which most of the production comes from small farms with a high social impact, tries to expand the success of coffee growers who manage to place their quality grains at prices above the international average - at the end of last year local producers got up to 50 dollars more per quintal in relation to the averages that were paid for the grains of this plant in the markets of raw materials of the United States-.

The reality of many Costa Rican lowland producers, on the other hand, is much harder: they have to bear high relative costs, to which must be added low productivity due to the difficulty of renewing crops, due to the climatic effect and associated pests. "My family has always had coffee and me too, but I rented the coffee plantation from a nephew, to see if he saves it," says Javier Fallas, a farmer from San Ramón de Alajuela, west of the Costa Rican Central Valley. "Coffee no longer gives. And it's a shame because the land is very good, but many prefer to sell it for construction. Others have left the plantation lost because it is very difficult to fight against the rust. "

Last year, the 'tica' harvest was the lowest in four decades. The total volume of production has been reduced by 43% in less than two decades. The total cultivated hectares, meanwhile, had fallen by 25% in 2014, when the last census was taken. That is why the sector's commitment is to focus on a more select consumer, even at the cost of reducing volumes: fewer hectares, but more productive and, above all, with a product that can be sold more expensively. It is the only way out for a crisis of which the 'Ticos' coffee plantations want to flee at all costs.

Leave the coffee, sow something else, something that does not give losses, no matter what; look for life in the city. In several coffee regions of Colombia, where this grain is the main export and 540,000 families live from it, desperation is the predominant note and the National Federation of Coffee Growers It comes to talk about a humanitarian crisis if the tables do not change soon. The first tangible consequence has been the reduction of cultivated areas and the decision of many farmers to leave the area: in less than four years the area dedicated to coffee has been reduced by almost 7%. And although there is no specific data on the number of families that have left coffee, there is the certainty that many have gone, partially or totally, to avocado - whose price has followed, in recent times, a trajectory opposite to the of coffee-, pineapple, sugar cane or tourism.

But in Colombia, a country where the armed conflict persists in several places and the coca business is highly profitable, there is one more factor to be taken into account: the risk that peasants who do not enter enough to live will be attracted by the illegal crops. "With these prices, how do you ask the people of Cauca, Putumayo or Nariño not to get involved in growing coca?" Points out Vélez, who believes that the peasants are tempted. This trend, which is also observed in Peru, extends to the cultivation of the raw material of other drugs, beyond coca. "Today being a coffee grower is brave and many have decided to abandon their coffee plantations to get into coca and poppies," congressman Julio César Triana recently emphasized.

The figures of low profitability support the concern. In Colombia, 96% of coffee farmers are small producers and sell their harvest at a loss. "It does not make any sense. The big cafeteria industry is getting all the money and the speculators do not care if others lose. Meanwhile, the producer can die of hunger, "adds Vélez. In these circumstances, the generational change is nothing more than a chimera: the children of the producers want, mostly, to leave the field. "In the relief generation, if we can not attract the boys with any guarantee that the coffee business will not be a loser, it will be very difficult to continue". And so that the small farms of many of the Central American, Colombian or Mexican families that have their livelihoods in the coffee are profitable and "can live and not survive" with the income derived from the sale of the grain, "the price would have to multiply by seven or eight ", closes Alejandro Cadena, Caravela.

The library that hides the perfect variety

Felipe Betim (Campinas, Brazil)

The Brazilian Júlio César Mistro walks among enormous and ancient coffee plants that a farmer would throw into the fire. But this is not a coffee plantation and Mistro is not a farmer. He is a scientist, the director of the coffee research area of ​​the Agronomic Institute of Campinas (IAC). Actually, all those plants are like old books and Mistro walks by what is rather a large library. The scientific name is a germplasm bank. 80% of all coffee grown in Brazil was developed in this laboratory. It is a green area of ​​700 hectares in the municipality of Campinas, just one hundred kilometers from the chaotic center of the city of São Paulo. There, this public research organization works, which has been studying how to improve the productivity of food for 132 years. In the coffee sector, an espresso machine welcomes visitors. The researchers, and their guests, are the first to test the grains that are being studied in this center of excellence. There are 12 similar centers scattered around the coffee growing areas of Brazil.

Researchers at the center can take up to 40 years to reach their main goal: to develop a new cultivar. That is to say, a totally new species of coffee that will serve the large producers that need to improve their productivity or product quality. Everything starts in that huge germplasm bank, built from more than 5,000 varieties brought from Africa in the sixties. Researchers from Embrapa, the Brazilian government agency that researches the agricultural sector and has an agreement with the IAC, study the genomes of the various species, cross them and experiment to achieve certain characteristics. "We can look for a coffee that is more resistant to pests and drought, or a coffee with less caffeine ...", explains Lilian Padilha, a specialist in molecular genetics.

60% of a farmer's success depends on the genetics of the plant. The remaining 40% of how you cultivate it, explains Mistro. "We study and sell the package. It means that a certain species has to be cultivated in a certain way, with certain fertilizer in a certain locality, "he adds. So in a second stage, outside the laboratories, experiments are carried out in the nurseries and haciendas to check if the discoveries have worked.

All research on coffee in this center of Campinas has been focused on serving the interests of the export sector. Productivity has taken a leap since the 1990s, when 2,500 coffee plants per hectare were grown. Today, says researcher Mistro, between 5,000 and 6,000 can be planted in the same space. It also uses less water and less heavy machinery, slowing down the erosion of the land. The Mundo Novo and Catuaí species are the main achievements of the center in recent decades. All an effort, paid with public money and also with the resources of a fund made up of coffee producers.

But Brazil is known for the huge amount of coffee it produces, not for its quality. The biggest experts in that drink, consumed more and more internationally, look for in countries like Colombia or Ethiopia what they consider to be the most refined flavors. The researcher Gerson Silva returned to that great library that is the germplasm bank to look for species that are no longer cultivated, like the Bourbon. Little productive, the quality is immensely superior. So he has been trying to improve the quality of Brazilian coffee for 14 years and 2010 created a sector in the IAC that focused on that. "It's a demand that comes from the international market, but in Brazil we also have a consumer who wants better coffee," explains Silva. Capsules and new machines have driven this new market and partly explain this new trend. But consumers want more: some accept paying for a special cup of coffee up to 50 reais (almost 12 euros) or about 200 reais (50 euros) for a few grams that they can grind at home and prepare it in different ways. Many producers have noticed and reserve part of their production for these gourmets.

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