Leaf Rust Disease Sweeps Through Central American Coffee Plantations

The International Coffee Organization recently released a report showing that Central American coffee crops fell by roughly 15% in the 2012-2013 season because of leaf rust disease. With economic growth across Central America slowing, growers in the region now face the double blow of lower yields and collapsing prices, and the countries themselves are absorbing the economic fallout. As Central America's share of the international coffee market gradually shrinks, traders have started hunting for new sources in Brazil, China, East Africa, Vietnam and elsewhere. Experts caution, however, that the supply of high-quality coffee on the world market will stay disrupted for a considerable time.

Employment Affected, Economic Losses Reach $600 Million

Peru's official Andina News Agency published an article on July 21 reporting that Agriculture Minister Von Aese said leaf rust would cut Peru's 2013 coffee production by 30% year on year. Peru is far from the only Latin American country hit. Coffee crops across most of Central America have suffered enormous damage from leaf rust, with roughly 70% of the crop affected in Guatemala, 32.8% in Honduras and 32% in Nicaragua.

The International Coffee Organization's recent report likewise puts the Central American crop decline for the 2012-2013 season at about 15% because of leaf rust. Most coffee traders believe this rust will have an even greater impact on the 2013-2014 season.

The damage reaches beyond production. Most employment in the region depends on coffee cultivation, with more than 2 million people working in the industry, so the sharp drop in output has driven employment down just as sharply. Data released by the International Coffee Organization shows that 440,000 people lost their jobs in the 2012-2013 season because of leaf rust, and that number is expected to keep climbing through 2013-2014.

Leaf rust, caused by a fungus that parasitizes coffee tree leaves, makes the leaves dry out and turn black. The pathogen first broke out on a large scale in 1976; this outbreak is the most severe to date. Silva, head of the International Coffee Organization, told the media that "this is a regional disaster" and a fatal blow to the economies of Central America. According to figures from the Inter-American Development Bank, the economic losses from this outbreak run as high as $600 million.

Limited Treatment Effectiveness, Disease Spreads to High-Altitude Areas

Laércio, a coffee research expert at the Brazilian Agricultural Research Institute, told our reporter that this outbreak stems from several factors. First, the varieties grown in Central America are highly susceptible to this pathogen, and because the planted area is so large, the disease transmits and spreads faster. Second, large quantities of the pathogen have had the chance to reach these plantations. Third, the large-scale outbreak is tied to climate change in the region: recent years have brought frequent high temperatures and rainfall, and hot, humid weather is a breeding ground for fungal reproduction. This outbreak also behaves differently from earlier ones, appearing in higher-altitude areas where the disease had never occurred before.

Laércio noted that although fighting leaf rust is enormously costly and time-consuming, Central American countries can definitely resolve the problem before long if they learn properly from the experience of Brazil and Colombia and adopt the right measures. In the 1970s, he explained, Colombia's coffee industry was devastated by leaf rust; with national backing, the National Coffee Federation invested $1.4 billion to tackle it, eventually developing several rust-resistant varieties and teaching growers how to fertilize and cultivate them, which largely solved the problem. Laércio also suggested that Central American countries spray specific chemical treatments to control rust, matched to how heavily each plantation is infected.

Because Central American governments have limited financial resources, however, and most growers are smallholders without enough money of their own, the treatment results are modest. Most growers can only uproot infected coffee and replant, and new plantings will not produce beans for at least 3 years. Instant coffee

Changing Market Share, Brazilian Coffee Exports Gains Opportunity

Central America has long been known worldwide for high-quality Arabica beans, with Mexico and Central America together supplying about one-fifth of the world's Arabica. Those beans are what retailers like Starbucks use for espresso, cappuccino and other drinks.

Natália Fernandes, Technical Director of the Brazilian Agriculture and Livestock Federation, told our reporter that in the past, Central American prices set the market because of their enormous share. That meant even a large-scale rust outbreak, by tightening supply and pushing prices up, did not inflict major losses on growers in the region. This time is different. With economic growth across Central America slowing, growers face the double impact of reduced yields and plummeting prices.

As Central America's share of the international coffee market declines, traders have begun seeking new sources in Brazil, China, East Africa, Vietnam and beyond. Brazil, the world's largest coffee-producing country, holds an unquestionable advantage, and its crop has now delivered bumper harvests two years running. Fernandes believes the poor harvests in Central America clearly create excellent opportunities for Brazilian coffee exports. Given how severely Central American countries have been hit by leaf rust this time, the supply of high-quality coffee on the international market will remain affected for a long time to come.

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FrontStreet Coffee Recommendation

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