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Central America in the Whirlwind...

By Tim Castle

If ever the term “Other Milds” applied, it does this year to the coffees of Central America. The isthmus is playing second fiddle to the trials and tribulations going on in Colombia, and to a lesser extent in Brazil. (Whether the term “mild” can apply in the future is a separate discussion, and will be addressed later.)

The handwringing in Colombia, as we go to press, is over whether the crop will come in at something like a pitiful five and a half million bags or kick butt (relatively speaking) with a more respectable eight and a half. It was abated somewhat after Jorge Cardenas of the FNC announced on February 8 that the Colombian crop would be around 8.7 million bags. The market plummeted based on Mr. Cardenas’ estimate but, as is true of most authoritative coffee crop predictions, no one really believed it and more gyrations, perhaps more violent, are likely to occur.

As for Brazil, in case anyone needs reminding, this nation has bigger problems on its plate than the cup of coffee next to it. While still the world’s largest producer of coffee, exports of that commodity are less than 2% of the total. As one Costa Rican farmer pointed out, how much their huge internal consumer market for coffee pays and the effect that has on inflation is of far greater concern to policymakers than whether coffee farmers can make ends meet. Hence, the counter intuitively high estimates for this year’s crop emanating from Brazil itself.

Substitutes for Brazilian coffee are not likely to come from Central America, however, and therefore the effect of their crop size will be less specific than will a downturn in Colombia’s, where the most logical substitute for its coffee lies slightly to the northeast in Central America. Farmers from Guatemala to Panama hope that Colombia’s misfortune will be their gain and that differentials, if not the market itself, will skyrocket should the Colombian crop fail to quench the world’s demand for washed coffee.

Arguing somewhat against the “Colombia Effect,” on differentials of “other mild” coffees, however, is the notion that for U.S. roasters at least, demand for Colombian coffee is a category unto itself. The buyer for one of the nation’s top three roasters noted, “We’ve got the amount of Colombians we use down to a minimum already. We’ve got to have it for our 100% Colombian coffees and if we’re blending with it we’ve got certain minimums we don’t feel that it would be ethical to go below.” In fact, if it weren’t for Juan Valdez and the consumer demand he has created, many roasters intimate they wouldn’t use Colombian coffees at all. Colombia’s shortfall, so the argument concludes, given the specificity of the roasters’ need for Colombia coffee, will merely push Colombian differentials higher and have negligible effect on the prices of Central American coffee, or the market itself.

Aside from the concern that Central American growers and exporters have for the outside influences outlined above, there are a few internal matters that bear discussion. In most of the nations of Central America the chief feature of this year’s crop is consistency and stability. No major upswings or downticks are predicted and quality is expected to be average on the whole. In the case of Central America’s two largest producers, Costa Rica and Guatemala, and upon which the rest of this article primarily focuses, there are some diverse and important issues coffee growers and exporters are facing which should be mentioned. In the case of Guatemala in particular, all systems are not go.

Costa Rica
Little change in Costa Rica’s overall production is foreseen for this crop year. The USDA predicts a slight increase, in fact, from 2.5 million last year to 2.55 this year. What it does not say, and what some farmers and exporters acknowledge, is that the composition of this year’s crop will be different and of lower average quality.

Many forces in Costa Rica are at work to both raise and lower production and the quality of that production. Obviously, which forces win out will be determined by which way farmers and processors believe they are best guaranteed to make a profit. On the one hand, higher yielding trees have been planted and many mills had aquapulpers installed over the past few years. On the other hand, ICAFE has been encouraging farmers to pick only the ripest beans and many farmers and millers have already abandoned aquapulpers. The ongoing water cleanup has also exerted a mixed influence, perhaps by lowering quality at first but more recently it may have made some processors more aware and better able to manage their water resources, even at the new and drastically reduced levels.

According to some in Costa Rican and even many U.S. importers, there is the general trend in Costa Rica to maximize production at the expense of the high quality for which Costa Rica has otherwise become known. “Everyone, except for the really high-end producers, is looking for ways to boost their production - quality is an afterthought, if that,” one frustrated importer noted and continued, “I have not seen anything to get excited about out of Costa Rica for some time.” Many importers and roasters assert that they can get much better value out of other origins, and with less fear of quality problems.

Bill McAlpin, perhaps the definitive high-end producer, whose Hacienda La Minita has set the pace for estate coffees around the world, cited the biggest concern among many producers being the production deficit in Colombia. The outcome of which could exert tremendous influence over prices paid for coffee throughout Central America, but particularly in Costa Rica. As far as the actual crop goes, McAlpin noted that, “Tarazzú had a bumper crop last year - this year will definitely be less, perhaps by as much as 25%. The quality this year for the region, though, has been spectacular.” Russ Kramer, also of Hacienda La Minita, pointed out that, given the downturn in Tarazu and accounting for crop projections for an 8 - 10% increase in the overall crop, “it will be the Atlantic High Grown coffees that will make up the difference.” Other regions known for high quality coffees such as Tres Rios and the area around Poas will not be able to make up the difference. “What this means is that the average quality out of Costa Rica will be lower this year,” Kramer concluded. How shippers will deal with the shortfall of higher quality coffee is unclear but this will obviously put even greater pressure on differentials - particularly if there are problems in Colombia.

Kramer did note that there are some positive developments, however, “The water cleanup is 95% complete and I think everybody pretty much agrees that aquapulping in Costa Rica is a failure. Both the appearance and the cup are better when the coffee goes through the fermentation tanks. While we’ve always believed this to be the case at La Minita (and never aquapulped) the experience of many other processors proves it conclusively.”

Perhaps the most disappointing development in Costa Rica, from the viewpoint of this writer, is the still unabated popularity of catimor hybrids in Costa Rica. One hopes that an industry which can evaluate and reject aquapulping could also be resolute enough to reject this harsh tasting coffee, particularly given the quality problems that it has caused in other countries, most notably Colombia and Kenya. But the prolific production of the catimor is far too tempting for most farmers, especially since the average U.S. and European consumer seem not to notice the difference.

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