Market Reports

F1 Hybrid coffee finds first commercial home under Starbucks Reserve label

The birth of the F1 Hybrid coffee variety is giving Nicaraguan coffee growers a new reason to be confident about the future of production.','none',' For the first time in the history of Starbucks, Nicaragua has its name prominently featured on one of its coffee bags. “This is a big deal for us as a coffee producing country,” says Henry Hueck, President of Ramacafe and 50 per cent owner of San Francisco Estate in Jinotega, Nicaragua. In early 2012, Starbucks, one of the world’s largest coffee chain retailers, purchased the new F1 hybrid variety from the Central American coffee institute, Ecom Coffee Group Agro. The coffee was branded a Starbucks Reserve product and merchandised ‘Nicaragua Diamond’. “We were intrigued when we tasted the coffee,” says Leslie Wolford, Green Coffee Specialist at Starbucks Coffee Company. “Nicaragua Diamond fits all of the Starbucks Reserve descriptors: it’s exotic, rare, and exquisite. It’s one of those gems that we came across and knew immediately that we had to have it in the Reserve program.” Wolford says Starbucks specialists spend a lot of time in origin countries searching for the finest coffees – ones with distinct flavours that “enchant, amaze and captivate”. Of the thousands of coffees encountered, Wolford says there are few deemed exceptional enough to become Starbucks Reserve coffees. “With all of our coffees, it comes down to taste,” she says. “Starbucks Reserve gives our customers an opportunity to try a unique and exquisite coffee that they might not otherwise have an opportunity to try – even if availability is limited.” From the first 2010-11 harvest of the F1 hybrid at the San Francisco Estate, 27,000 pounds were collected. From this crop, 270 45-kilogram bags of the hybrid were bought by Starbucks, of which 70 per cent comes direct from Hueck’s San Francisco Estate. In 2004, the Ecom Coffee Group signed a contract with the Centre de Coopération Internationale en Recherche pour le Développement (CIRAD) to develop a new generation coffee variety. Using somatic embryogenesis technology, scientists crossed Latin American dwarf and adaption varieties with Ethiopian resistant coffee varieties. The end result was the F1 hybrid of Moka and Caturra varietals with high yield, disease resistance and the ability to be mass-produced by farmers. Fast track eight years after the first seedlings were planted, and those plants have flourished into crops many are seeing as a golden – or rather a ‘diamond’ – investment opportunity. Hueck is currently the owner of San Martin Estate, La Virgen, Las Marias and San Francisco Estate in Nicaragua. His business partner is Eric Poncon of Cafetalera los Compadres S.A. The two are also the owners of Ramacafe. They  first heard about the development of the new F1 hybrid in 2008 when it was introduced to a lab in Sebaco, Nicaragua. Demo plots for the F1 hybrid were planted in El Salvador, Costa Rica and Mexico, then taken to 70 different sites in Nicaragua where researchers planted 1000 trees to determine how the plants would adapt. While other top producing regions had tried to grow this hybrid, Hueck says the F1 variety has only been able to thrive within the terrain of North and Central Nicaragua because of its rich volcanic soil and abundant rainfall. Hueck and Poncon bought the San Francisco  Estate in 2008, an abandoned farm 1000 metres above sea level. They reforested it with 40,000 trees to provide the necessary shade for the F1 hybrids. Hueck proceeded to plant 0.7 hectares of the hybrid in each of his four coffee estates to test its suitability and optimum growing conditions. Pleased with its progress, he took a leap of faith as the first Nicaraguan producer to install the F1 hybrid variety on his farms “You always take a risk with a new variety. It’s a risk because it can determine our future – but somebody always has to be first, and this time it was us,” Hueck says. “Now we are the biggest F1 hybrid coffee producers in Latin America.” Hueck planted 14 hectares of the hybrid in shade in 2008 at the San Francisco Estate, followed by 52 hectares in 2009 and 34 hectares in 2010. “It was a fresh start as a producer and for our customers,” he says. The new F1 hybrid however, doesn’t come cheap, with seedlings costing twice the price of regular coffee varieties. “If you’re going to invest $2500 on 0.7 hectares of coffee, you have to spend $5000 per hectare when you plant the hybrid,” Hueck says. To accommodate the new hybrid, Hueck invested in quality nutrition and fertilisation products to ensure production levels were achieved. He also installed new Penagos machinery and a stainless steel wet mill. “You cannot make diamonds with an old wet mill,” Hueck says. “Everything has to be top of the line with the hybrid, you cannot cut corners because we’re putting a huge investment into this variety.” Already, it seems Hueck’s investment is paying off. “To have gone from zero production to harvesting 30,000 pounds in the first harvest year, then 230,000 pounds in the past harvest (2010-11), is impressive,” Hueck says. An independent economic study on production levels in 2011 found that the new F1 variety had 130 per cent higher  productivity after four years and 75 per cent greater productivity after seven years, Dr Christophe Montagnon wrote in the March 2011 edition of GCR. Over a seven-year period, it was estimated that the new F1 varieties would generate a net present value of US$11,244 per hectare, compared to $5774 for traditional coffee varieties. A costly, yet necessary investment to ensure the future of quality coffee production in Nicaragua, Hueck says he’s expecting to harvest about 500,000 pounds in the 2011-12 harvest at the San Francisco Estate and 800,000 pounds by 2014. An optimistic start to future production, Hueck says he’s “struck gold” with the quality of production and the recent investment by Starbucks. “Starbucks finds this coffee exquisite so our investment is paying off – thankfully we’ve landed on the right foot,” he says. “Anything that promotes Nicaragua helps Nicaraguan producers, so having a company like Starbucks purchase this coffee does a lot for our country. It’s like winning a beauty pageant and getting global recognition.”
According to Hueck, it’s not only Starbucks who have their sights set on the Nicaraguan grown hybrid. He says they’re receiving commercial attention from across the globe, including producer and distributor Arvid Nordquist in Sweden and roaster El Dorado Coffee & Tea Co in California. “Many producers from different parts of the world are coming to see our farm and see how the hybrids are developing and conducting in the environment,” Hueck says. “They want to come when the plants are two-years-old, three-years, four-years… just like watching our children grow up.” Seven hundred people from 23 countries travelled to Nicaragua for the 2011 Ramacafe conference. Following the conference, 450 people attended a field trip to the San Francisco Estate to see first-hand the production of the hybrid. “A lot of people are betting on the hybrid to succeed, even roasters,” Hueck says. “Everybody thinks that in 10 years, 70 per cent of coffee consumption will be Robusta, but a lot of people are betting on quality and sustainable coffees, and the hybrid might be that solution. There has to be a market for a product to work, and thankfully, the buyers are there, they’re just waiting for us to produce.” Timothy Schilling, Executive Director of World Coffee Research (WCR) along with representatives of the Specialty Coffee Association of America (SCAA), were one of the first few people to see the hybrid crops in their developmental stage at the San Francisco Estate in 2010. “We were thinking these hybrids looked good in the field, but surely they’re not going to hold up in the cup,” Schilling says. “But to everyone’s surprise, some of the hybrids cupped very well indeed. It’s true the hybrids do seem very promising.” The SCAA board members gave the hybrid an 87 cupping grading. Schilling says the cupping experience highlighted the importance of investigating the potential of hybrids, with its only downfall being its lack of experience. “We just don’t know how they (the hybrids) will perform in 15 to 20 years out,” Schilling says. “All we have is information about their first five to six years of life, which has been very good, and it should continue to be the same, but we just don’t know.” While the future may be one of high expectations and uncertainty, Hueck says his focus is on offering 30 per cent more production of the F1 hybrid without increasing land area. “Currently the cost of production is very high in Nicaragua, but there comes a point when the only way to reduce the cost level is to be more productive,” he says. The growing coffee industry in Nicaragua has faced periods of natural disasters, civil war and the coffee price crisis from 1999 to 2003, forcing many Nicaraguan coffee growers to leave their plantations or change their agricultural practices. As the world’s eighth-largest producer of Arabica beans, according to the Center for Export Procedures (CETREX), coffee has been a key contributor for Nicaragua’s national economic development process, generating US$430.5 million in coffee sales between October 2010 and August 2011 and providing more than 200,000 agricultural jobs.
Today, Hueck says it’s not coffee prices that remain the problem for Nicaraguan coffee farmers – its supply. “Other producers here in Nicaragua don’t have enough plants to cater for supply and demand,” he says. “At this moment, they can’t keep up. They (the farmers) really need to act now.” Obstacles aside, Hueck says the F1 hybrid is a step forward in increasing the productivity of Nicaraguan coffee and sustaining quality coffee for a long period of time. “The new variety is a win-win on all levels through the supply chain; at the production level because it increases productivity; for the industry, because it reduces concern about the decreasing levels of Arabica and shortage of quality; and the consumer will get quality coffee in the cup,” Hueck says. “The biggest challenge for us right now is the scepticism of buyers.” Hueck says this Nicaraguan F1 hybrid can at least overcome doubt by proving its taste. He remains positive that the future of the Nicaraguan coffee producing community is regrouping and to an extent, thanks to this new coffee variety. “Like anything, we don’t know what’s going to happen in 20 years with the plantation,” Hueck says. “But we think we can make enough money with the quality and productivity in the years ahead to make a decent living for not only the Hueck and Poncon families, but most importantly for our team of 200 people who work on the farms and their families .” 

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