Honduran Coffee Production Continues to Fall

TEGUCIGALPA - May 29/02 - SNS -- With coffee prices hitting a 30 year low, Honduran coffee production is estimated to drop 5.7% from 2001/2002.

Current USDA estimates show coffee production for this year to reach 2.45 million 60 kg bags, or 147,000 metric tons (MT). Production for 2001/2002 was 2.60 million bags or 156,000 MT, 10% lower than 2000/2001's final production figures of 2.876 million bags or 172,560 MT.

The coffee crisis in Honduras has been a result of the steady decline in world coffee prices which are at their lowest level in 30 years. It has also caused 80% of the small farmers and 20% of the large and medium producers to accumulate a high level of debt. Many farmers are unable to cover production costs. The situation has severely affected about 20,000 small producers who have abandoned coffee production over the past couple years. It is reported that their farms are now covered with weeds or have been repossessed by the banks. To reduce expenses many coffee farmers are forgoing the use of fertilizers, hiring fewer employees who are working shorter hours, and picking less cherries.

Domestic consumption continues to be small relative to crop production and exports of Honduran coffee. For example, only about 10 to 12% of the harvest remains in the country. Domestic consumption increases about 2.5% annually, meaning the 2002/2003 total domestic consumption of coffee is forecast at 286,000 bags or 17,160 MT.

Exports from Honduras during 2002/2003 are estimated to be 2.2 million bags or 132,000 MT. However, there is a steady flow of unregistered coffee going to neighboring countries, particularly to Guatemala (150,000 bags or 9,000 MT) and El Salvador (20,000 bags or 1,200 MT). Some of the reasons for the illegal trade is the captive market that the exporters have, since according to law they are the only ones that can export. Another aspect is that in Guatemala there is a higher capacity to negotiate future markets. In Honduras, neither the producer or the exporter has developed the means for such capacity. Subsequently, the only way to expedite a sale are through intermediaries, who frequently smuggle it to Guatemala. Also, in Guatemala buyers can afford to pay higher prices for lower quality Honduran coffee and then mix it with Guatemalan beans since Guatemalan coffee is often sold at a premium in the international market.

The decline in production and markets for coffee has cut the number of export companies by 5 to 37 this year. Coffee exports contribution to Gross Domestic Product (GDP) has also decreased. In 1997 coffee accounted for 7.8% of the GDP; in 2001 it was only 1.8%.