Coffee Industry Bucks

MANAGUA – The global financial crisis that has taken a toll on various productive sectors of the economy has spared the coffee industry, which continues to see steady market prices and consistent growth in international consumption levels, according toindustry leaders.

“In terms of consumption, there was a huge worry about whether people were going to continue buying and drinking coffee,” said Néstor Osorio, executive director of the International Coffee Organization (ICO). “But at this stage, there is no impact registered in the consumption of coffee and the dynamic of consumption continues to be very positive.”

The international coffee guru said the worldwide consumption level continues to grow at around 2 percent a year, providing a large enough market to absorb all 128 million sacks of coffee produced around the globe this year.

Though some U.S. coffee retailers have been forced to adjust prices due to shifts in consumer patters over the past two years, the international trading prices of coffee have remained stable between $.70 and $1.20 a pound, after dipping as low as $.25 duringthe coffee crisis at the beginning of the decade.

Unlike other food and beverage commodities that have been affected by the economic crisis, “coffee has its own dynamic, autonomy and cycles,” Osorio told The Nica Times during last week’s Ramacafe international coffee conference in Managua, one of the industry’s most important annual events in the region.

“From 1995 to 2000, when there was a crisis in the costs of basic products, coffee prices were high because there was a crisis in the Brazil harvest in 1994, which meant the global coffee offering was diminished and coffee prices went up,” he said. “Then Vietnam started to grow coffee and Brazil started to replant its coffee, leading to a crisis in coffee costs in 2000, just as the costs of other basic crops were recovering.”

Similarly, coffee prices could be affected next year when Brazil is scheduled for its big harvest – expected to be 10 to 15 percent more than this year’s. Central America and Mexico are also expected to recover the 4-5 million sacks of coffee lost to weather this year, bringing the region back up to 20 million sacks.

But so far, “world consumption levels are still growing and world production levels haven’t caught up,” notes Nicaraguan Trade Minister Orlando Solórzano, who is also president of the Nicaragua’s National Coffee Council (CONACAFE). “That is good for prices and demand in the future,” Solórzano told The Nica Times, adding that Nicaragua’s harvest this year is estimated to be around 1.7 million sacks, and should be slightly greater next year.

A major future challenge facing producers is to find sources of financing and insurance, Osorio said. The costs of production are still very high, and credit and financing options are limited.

Nicaragua has attempted to help its own cause by last month ratifying the International Coffee Agreement, which will allow the country to apply for international coffee financing through the ICO.

“Financing is one of the great challenges we face,” said Minister Solórzano.

But in the long run, the minister said, the quality of Nicaraguan coffee will help the country remain competitive in the world.

“I would say we have some of the best quality coffee in the world,” he said.

–Tim Rogers