Coffee Crisis in Central America

by Gavin Fridell
Photo Credit: Simon Granovksy-Larsen

A major coffee crisis is brewing in Central America. Its impact has already been felt by the poorest workers and farmers, and things could get a lot worse. In 2012 an outbreak of “coffee leaf rust” (a fungus that has long haunted the industry) hit Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The outbreak is the worst in over thirty years, affecting over 50 per cent of the total coffee growing area in the region, causing a nearly 20 per cent drop in production and costing the

industry around $500 million. Over 373,000 jobs have been lost – around 17 per cent of the region’s entire coffee-growing workforce.

Those who follow the twists and turns of the coffee industry might wonder, “didn’t we just get over a major coffee crisis?” At the turn of the millennium, global coffee bean prices dropped to historic lows, causing mass layoffs, hunger, and bankruptcy for tens of thousands of farmers and workers worldwide. Prior to this, from 1963 to 1989, an International Coffee Agreement had helped stabilize and increase prices by holding a certain amount of beans off the market to avoid oversupply. It collapsed in 1989 when several countries, led by the United States, withdrew their support in favour of “free trade,” leading to two decades of market instability.

In 2011, prices suddenly boomed and analysts rushed to celebrate the new “bull” market, only to have their hopes dashed with a rapid drop in prices in response to cooling demand in Europe. Today, prices are the lowest in three years and the Monthly Coffee Market Report for May 2013 by the International Coffee Organization (ICO) has raised concerns that “many producers may be selling at a price which is not remunerative compared to the cost of production.”

In Central America, global trends have been overshadowed by a local ecological crisis. Beyond a mere act of nature, a major factor in the coffee leaf rust outbreak has been the spread of full sun, monocrop cultivation since the 1970s, which covers approximately 40 per cent of the region’s coffee areas. This involves the heavy use of chemical pesticides and fertilizers and substantially reduces the biodiversity of coffee trees and natural predators to coffee pests. University of Michigan ecologist John Vandermeer has suggested that monocrop cultivation has led to the decline of white halo fungus, which naturally restrains coffee leaf rust. This loss may have played a significant role in the outbreak.

So-called “green revolution” technologies favouring full sun cultivation have long been actively promoted by US government agencies and powerful philanthropic organizations, like the Rockefeller Foundation and the Bill & Melinda Gates Foundation, and more or less embraced by governments and wealthy coffee farmers in Central America. And yet, it is workers and small farmers (who generally grow their beans under more sustainable shade grown conditions) that will pay the greatest price as they lack the resources to buffer themselves from the crisis.

Shade, Coffee, and Ecology
The monocrop, sun-grown coffee formula trades a short-term increase in crop yield for long-term ecological decline. On forest shade coffee farms in Chiapas, Mexico, researchers counted 184 bird species; on nearby monoculture farms, six to 12 species. A shade-grown coffee plantation is a modified natural forest, with benfits to the forest ecology, better species diversity, soil protection, erosion control, carbon sequestration, natural pest control and improved pollination. Shade-grown coffee offers a “hidden yield” in ecological services. Shade coffee farms allow for secondary economies in firewood, building materials, medicinal plants, and more stability for small farmers.

Forest-based shade coffee farms provide habitat for birds, reptiles, insects, butterflies, bats, and native flora. In Jamaica, farm researchers calculated the pest control service from birds alone to be worth $75/hectare. Likewise, lizards control the leafminer insects that attack coffee plants. A Venezuela study showed twice the annual erosion on sun-grown monocrop plantations compared to forest coffee farms. Sun-grown coffee depends on fertilizers and pesticides that pollute the ecosystem.

Predictions of the coffee crisis over the next year are even more dire, with estimates that production could drop by 50 per cent. In the longer term, the coffee crisis could become another climate feedback loop, hastening the potentially devastating impacts of climate change. Higher temperatures threaten the region’s high quality Arabica beans, coveted by the specialty coffee industry. At recent ICO meetings both government and industry representatives voiced concerns that the combination of coffee leaf rust and climate change could spell the demise of the region’s high quality, and highly priced, beans.

Typically, in the era of “free markets,” governments issue desperate bailouts after the crisis has already begun. Central American governments have pledged tens of millions of dollars in assistance while the ICO has initiated a campaign seeking hundreds of millions of dollars in loans and grants from international donors and the private sector to support special pesticide applications targeting rust, tree renovation to replace old trees with more rust-resistant varieties, loans to farmers, crop diversification, and food security to partially offset dropping incomes.

After-the-fact support such as this tends to help wealthier farmers, who have the resources to remain standing long enough to see aid actually emerge. Small farms and unemployed workers may see little or no help. Hundreds of thousands of workers have already lost their jobs and millions of small farmers are already confronting crises.
Consumers can provide some relief to Central American farmers by choosing to buy fair trade coffee certified by Fairtrade International (FLO), which provides a minimum guaranteed price and “social premiums” to build things like schools, roads, hospitals, and coffee facilities. However, fair trade only reaches about three per cent of the world’s coffee farms. Furthermore, fair trade standards, while desirable, can prove onerous for poor farmers to meet, requiring extra work and resources, and the standards do not address the fundamental imbalance between rich and poor in the coffee world. The crisis will disproportionately affect the poor.

Long overdue changes to the coffee industry are would put more income and resources into the hands of the poorest farmers and workers through state-supported education, health, and agricultural programs, land reform, and a revival of international price regulation. Otherwise, when this coffee crisis finally subsides, we may as well gear up for the next one.

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Gavin Fridell is a Canada Research Chair in International Development at Saint Mary’s University, Halifax; an independent observer to the 2013 International Coffee Organization meetings in London, England, and author of Alternative Trade: Legacies for the Future.

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