Central America’s largest coffee producing nation is getting bigger. After five years of relentless weather problems resulting in smaller than expected crops across the world of coffee, from drought in Brazil and East Africa to excessive rains and failed flowerings in Vietnam and Indonesia, the developments in Honduras are welcome news to the market. From local exporters and growers, to the official Honduran Coffee Institute, Ihcafe, and the US Department for Agriculture (USDA), everybody agrees production is at record levels. The only question is by how much, with figures quoted in a range from 5.5 million to 6.5 million 60-kilogram bags, according to industry officials. “We had a very good flowering for this crop and, apart from that, the growers have done a very good job in getting production back on track from the rust epidemic from which Honduras is now fully recovered,” Mario Ordonez, Technical Manager for Ihcafe, tells Global Coffee Report. At the time of the rust outbreak, which started to appear in farms in Guatemala and El Salvador in July of 2012 and would go on to become the worst outbreak to hit Central America in history, the coffee industry in Honduras was already way ahead of the game. Thanks to a government-subsidised program launched in 2008, a vast area of ageing farms had already been fully or partially re-planted with new and more disease-resistant varieties at the time the pest hit the region. The fact that most farms had some level of new plantings which were not only resistant to the rust pest, but also younger and better cared for, provided Honduras with the best possible defence against rust. “In Honduras the rust outbreak hit between 20 and 25 per cent of the planted area in farms in the worst cases, and in the new farms planted by private investors there was as little as 10 to 15 per cent damage. It was only in the organic farms that more severe incidents of rust damage were recorded, and even there we did not hear of many cases with over 30 per cent of the area hit,” Ordonez says. Such figures may sound alarming to some in the industry, but they show the importance of good agricultural practices such as regular renovation and replanting with new varieties and basic husbandry. To compare, rust devastated between 50 and 70 per cent of plantations in Guatemala, El Salvador, Mexico and Peru, the countries most severely hit. With pro-active leadership the Honduran coffee industry has shown that when it comes to addressing the challenges of the country’s more than 111,000 small holder growers, it is a role model for other coffee producing countries. Across most of the world’s coffee nations, the industry remains dominated by tiny producers who have an average of one hectare of land or less per household unit. And this leadership is now at the root of efforts that has put Honduras on track for a record harvest just five years after the rust pest first hit the region. “Our target is for Honduras to be able to export at least 6.133 million bags in the 2016-17 crop cycle, which is exactly the target we had in the harvest that coincided with the outbreak of rust in Central America,” said Dagoberto Suazo, Deputy Manager of Ihcafe, in a recent interview with local press in the Honduran capital of Tegucigalpa. With domestic consumption estimated at close to 400,000 bags, this would take total output in the current cycle to about 6.5 million bags. That would surpass the official projection released just before the rust outbreak for Honduras to produce a record 6.1 million bags in the 2012-13 cycle, which would have been up from the then record crop of 5.9 million bags produced in the 2011-12 harvest cycle. Instead, output fell to 4.537 million bags in the 2012-13 cycle, Ihcafe figures show. The optimism is shared by the USDA, which in its initial forecast for the 2016-17 cycle released in June last year projected total production in Honduras to reach 6.1 million bags. Last December, however, the USDA lowered its number, saying low international prices in the period from flowering through bean formation had caused many growers to apply less input such as fertilisers. Despite that, Honduras is leading the recovery efforts in Central America as the only producing country to post a full recovery, the agency said. “Honduras is expected to rise 200,000 bags to 5.5 million, just short of pre-rust output levels. Bean exports for the region are forecast to gain 300,000 bags to 13.1 million bags mainly due to higher exportable supplies in Honduras,” said the USDA in its report. In the 2015-16 cycle Honduras produced 5.3 million bags, the USDA added. Even though the latest USDA figure is lower than the Ihcafe forecast, unlike its neighbours Honduras is the only country in Central America that has recovered. In the 2013-14 cycle, it maintained production at 4.568 million bags and already a year later in the 2014-15 harvest year produced a recovery of 5.4 million bags. The region’s usual top producers Guatemala, Mexico and Peru as well as tiny El Salvador are to this day still struggling to get production back from the past five years of rust crisis. The successful recovery seen here is all the more impressive when taking into account that Honduras is the world’s largest grower and exporter of organic coffee, a segment of the coffee industry that notoriously has borne the brunt of problems from rust due to the restriction of chemicals in the fight against the rust fungus. This, say officials, is thanks to the already established practice of regular renovation at the farm level. “Here at the Capucas cooperative we still have a lot of the original Caturra and Typica varieties, and even if they are much more vulnerable to rust than those introduced to the market today, we try to keep a good percentage of these in the farms because of their high cup quality,” says Omar Rodriguez, General Manager at the Capucas coffee cooperative based in the Western Honduras coffee region of Copan. Grown at altitudes as high as 1600 metres, Capucas’ rise to fame and acclaim alike for its top-quality beans and high social practices is just one example that shows how effective Honduras’ coffee revolution of the past decade has been. From a reputation of producing commercial type beans primarily used in blends, since 2008 Honduras has moved to not only take over from Guatemala as Central America’s largest exporter and grower, but is also increasingly an origin sought for specialty coffees from the country’s 264,000 hectares of coffee lands. And if this wasn’t enough to impress, in 2012 Honduras also took over as the world’s largest exporter of certified organic coffee ahead of Peru and Mexico, with Ihcafe figures showing organic exports alone exploding to more than 1.1 million bags in 2013-14 from less than 70,000 bags in the 2005-06 crop cycle. This was at a time when the rust infestation was at its peak. “Our growers are almost 100 per cent organic but even so, and even if we did see rust in some areas of up to 30 per cent, we managed to bring the situation under control relatively quickly because we have had a good regular level of renovation,” Rodriguez says. From 1999 when Rodriguez founded the cooperative, which is also known as Cocafcal, the member base has grown to more than 840 with production from a total of 3,500 hectares and output of some 107,000 bags a year. One of the largest cooperatives in Latin America, Capucas’ growers offers roasters beans grown under seven different labels of certification including organic, Rainforest Alliance and Fairtrade, all offered in everything from specialty single variety or other micro lots to macro lots of multiple containers. As Honduras is making a strong return following the rust crisis, overall production in the region remains a concern to roasters and traders in the market. “After several weak years, Central American production is expected to tick up in the year to September 2017, due almost entirely to higher production in Honduras. Central America has suffered from widespread leaf rust problems, and Central American production is only 79 per cent of what it was five years ago,” said John Abbink, analyst for the online investment forum fronteranews.com, in a blog post published last December. A review of production statistics from the USDA, the ICO and independent German statistician FO Licht confirm that world coffee production, with only a handful of exemptions including Honduras, has stagnated – not just since before the rust crisis, but all the way back to the 1990-91 crop cycle. A stunning 25 years of consecutive decline from poor husbandry, low prices and ageing trees have only been offset by new production from Brazil, Vietnam, Honduras, Tanzania and Ethiopia. Peru, which also saw production booming in the years to the rust outbreak, has seen rust taking production back to the levels recorded in the late 1990s. And Colombia, while it has made a solid recovery from the production crisis that started there in 2008, is still well behind figures of production between 14.3 and 17.8 million bags seen from Colombia between 1990 and 1993, ICO-data reveals. Overall, the key Latin American Arabica producers of Mexico, Central America, Peru and Colombia are projected to produce 32.925 million bags in the new 2016-17 harvest cycle, only a tad up from production in the last 2015-16 crop of 32.55 million bags. This is below production in the 1999-2000 record cycle for the region where this group of countries produced 33.3 million bags, and even further below production in the 1991-92 cycle of 35.226 million bags. Furthermore, production at the time was measured against world consumption of 79 million bags while global demand today has soared to a stunning 152-156 million bags. With the pressure on supply for both the short and medium term, traders and analysts are all the more excited about the upbeat developments seen in Honduras, which has shown that even a country of tiny growers can make expansion viable. “Honduras is definitively back from the rust and is increasing production again,” says Jack Scoville, Vice President of Chicago-based brokers The Price Group.
Even though supply concerns will persist, for now, Honduras is a source of good news for the market. GCR
Market Reports
Honduras’ remarkable rust recovery
