Coffee Leaf Rust Threatens Production in Central America

Coffee growing nations in Central America will need $300 million to fight a disease spreading in the region and reducing crops, said Nils Leporowski, president of Guatemala’s National Coffee Association, known as Anacafe.

Guatemala, Central America’s second-biggest coffee grower, may lose a third of its crop because of leaf rust, President Otto Perez Molina said yesterday in Davos, Switzerland. The crop in Costa Rica may be 30 percent to 40 percent smaller because of the fungus, President Laura Chinchilla said in a separate interview in Davos. Coffee exports from Honduras, the region’s biggest grower, will be down 767,000 bags due to leaf rust, also called roya, the Honduran Coffee Institute said.

Coffee production in Mexico and Central America will be 19.7 million bags in the 2012-2013 season that started Oct. 1, the International Coffee Organization estimated in a report on Jan. 9. That is 2.8 percent lower than the previous forecast of 20.3 million bags, data from the London-based group showed. Farmers around the world will harvest 144.1 million bags, the ICO estimates. A bag of coffee weighs 132 pounds.

“In the next few months when demand increases, the market will realize that the countries south of Mexico to Peru do not have the amounts of coffee expected and that there will be less availability of high-quality coffee,” said Ronald Peters, executive director of the Costa Rican Coffee Institute, adding that higher temperatures and below normal rainfall may have helped fuel the outbreak.

Coffee Futures

Arabica coffee futures traded on ICE Futures U.S. in New York declined 37 percent last year, the most in more than a decade, partly because of a bigger crop in Brazil, the world’s largest grower, and rising stockpiles. The beans favored by Starbucks Corp. (SBUX) were the worst performing commodity in the Standard & Poor’s GSCI gauge of 24 raw materials last year. Prices are up 2.7 percent this year.

“The roya situation and the potential that next season’s crops may be impacted is certainly a current focus of the market,” Keith Flury, an analyst at Rabobank International in London, said by e-mail yesterday. “If the Central American crop is lower, this will support coffee prices.”

Guatemala’s government will help growers cope with losses from the foliage-attacking disease, Perez Molina said. The country will spend $40 million to fight the fungus, Anacafe’s Leporowski said, adding that as many as 100,000 jobs could be lost in the season started Oct. 1 due to roya. Costa Rica will provide aid to farmers affected, said Chinchilla.

The disease will probably spread throughout the region as last year’s slump in prices reduced farmers’ income, limiting their ability to pay for chemicals to treat crops, said Stefan Uhlenbrock, an analyst at F.O. Licht GmbH in Ratzeburg, Germany.

Government Aid

“The minister of agriculture briefed us at the last meeting and told us about the impact, which could be very big,” Perez Molina of Guatemala said. “The government will help farmers, especially small-and medium-sized ones.”

About 40 percent of Guatemala’s 2013-2014 crop may be lost because of the disease, up from 15 percent of the harvest this year, according to Leporowski. The 2013-14 season will run from Oct. 1 this year to Sept. 30, 2014.

About 17,000 farmers in El Salvador, or 65 percent of producers, will receive aid from the government to fight the outbreak, newspaper El Diario de Hoy reported Jan. 23.

The damage in Costa Rica may be “very high,” Chinchilla said. The Costa Rican Coffee Institute, known as Icafe, cut the nation’s production estimate to 1.648 million bags from a previous forecast of 1.714 million bags, it said on Jan. 4. Some farmers have already lost as much as 20 percent of their crop, said Peters.

To contact the reporters on this story: Andres R. Martinez in Davos, Switzerland at amartinez28@bloomberg.net; Andrew J. Barden in Ottawa at barden@bloomberg.net; Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editors responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net; James Attwood at jattwood3@bloomberg.net

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