Market Reports

Guatemala’s quality equation to increase production levels

It takes several hours, driving along narrow windy mountainous roads, to reach Guatemalan coffee farms.  They only start to undefined

emerge when the altitude gradually climbs to 1400 metres above sea level.

The entrance to one such farm, Finca Bella Vista, is covered by a typical thick grey-bluish mist. Geographical conditions have given this particular coffee region its name ‘Rainforest Coban’, which attracts high market prices for its recognisable full-bodied crop.

In addition to the established trees growing these rich cherries, the farm is trickled with multiple rows of tiny new plants. The farm’s 33 hectares of coffee holds 5100 trees per hectare, and Farm Manager Noe Tello explains they also have around 50,000 seedlings in their nursery for ongoing renovation.

“Right now we have about 5.5 hectares under renovation and after the next harvest we will be doing a lot of pruning,” says Tello. “And then we have another 5 hectares that haven’t been cultivated yet, but we will be planting new coffee there next year to expand production.”

Reports like this one from Finca Bella Vista are good news to roasters and coffee lovers worried about the increasing share of low grade Robusta varieties in blends. When Arabica prices surged to 14-year-highs in May 2011, many roasters increased their use of Robusta. But price hasn’t been the only contributing factor to the increasing use of Robusta. Some analysts and industry officials say the dwindling availability of Arabica beans in the last decade have forced roasters to add Robusta to their blends to feed rapidly growing demand.

In Guatemala, export statistics show that as much as 77 per cent of national output is sold as high-grade specialty coffee. This makes the nation increasingly important for roasters looking to keep the quality in their blends.

“In the last 10 years we have seen the production of Robusta coffee increase by between 10 and 20 million bags, while the production of washed Arabica coffee of export quality has not increased in the last 10 years,” says Ric Rhinehart, Executive Director of the Specialty Coffee Association of America (SCAA). “On the contrary, the availability of Arabica has been reduced by 10 million bags, and it’s a real concern for the specialty industry because obviously we are dependent on these washed Arabicas.    

“Guatemala is increasingly important for the production of quality washed Arabica, particularly as Colombia has lost so much output over the last few years,” Rhinehart tells GCR. He says that efforts such as those seen in Coban, however small they may seem to the outside observer, are greatly welcomed by the specialty industry.

While demand has continued to increase, Rhinehart says fewer producer countries have been engaged in production activities and renovation efforts. This leads experts like Rhinehart to question not only where the volume of new coffee is going to come from, but importantly how the market will maintain a good share of quality coffee.

“We didn’t see any significant new plantings even when prices were at US$3. It’s a frightening scenario and my great fear today is that as farmers lose incentives to renovate because of current prices, the quality incentives are lost and we are at risk of seeing a disaster spiralling out of control,” he says.

Rhinehart is not alone in his fears. At the headquarters of the Guatemalan National Coffee Association (Anacafe), Anacafe President Ricardo Villanueva says that producing countries like Guatemala are particularly concerned that the quality of coffee sold in importing countries is falling. He warns that falling quality could impact consumption, a trend that has already happened in recent history.

“Guatemala lost almost 30 per cent of the production it had prior to the coffee crisis,” Villanueva tells GCR during a visit to Guatamala in late July. “We still haven’t been able to recover that production and if it weren’t for the expansion of new areas and the renovation that has been done, our production today wouldn’t even be much above 3 million bags. We wouldn’t have been able to maintain production at 3.5 million bags, where we have seen our production stabilise in the last few years.”

Following devastating coffee price drops at the turn of the millennium, the lower altitude areas were taken out of production. However, new areas have emerged in higher altitude regions such as Guatemala’s northern Huehuetenango region, which has recently produced some of the world’s most expensive beans. Anacafe has been actively involved with small and large producers to ensure that basic renovation efforts stay on track.
“Guatemala used to have 350,000 hectares of coffee before the crisis started in 2000-2001 and today we have 280,000 hectares,” says Villanueva. “You have to invest in renovation just to maintain the current production, but the problem is that about 65 per cent of all coffee trees in Guatemala today is between 15 and 25 years old and in urgent need of renovation.”

Since January, following the official start of the administration of Guatemala’s new President Otto Perez Molina, Anacafe has stepped up talks with the country’s Agriculture Ministry. Under the new government, the government has voiced interest in developing new political support for renovation efforts as a measure to help the country’s producers raise yields and boost incomes as part of poverty alleviation efforts.

“There is nothing preventing us getting average yields closer to 20 bags [per hectare], but in order to raise yields you need to fertilise at least two to three times [per year]. With current prices, producers can only afford to fertilise once a year, so we are not going to be able to get higher yields than the average 12 to 13 bags per hectare we have now,” says Anacafe’s Villanueva.

Back in Copan, a visit to the Chicoj Cooperative shows how the renovation efforts have paid off. The cooperative’s 120 members produce an average 16 to 17 bags per hectare, over 30 per cent higher than the national average.

“Between 75 and 80 per cent of our members today actively participate in regular renovation efforts,” says Cooperative President Domingo Cu. “It has taken many years of education programs to get so many [farmers] to see the benefits, but today the results are making it clear. This year, even if we have a smaller overall crop, the yields for many producers are actually higher.”

At the neighbouring Finca Cappuccino, Anacafe’s long term market analyst, and a producer, Esther Eskenasy says there is no doubt Guatemala will be capable of recovering some of the production lost since the crisis, as long as prices continue to be supportive.

Few countries have the institutional capacity in place to support an active renovation program such as Anacafe. Even fewer have producers and land so uniquely qualified for producing some of the world’s highest cupped coffees. But prices will continue to remain key.

“Last year I broke even with the crop, but with prices where they are now, it’s going to be very difficult to see much renovation,” says Eskenasy. GCR

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