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Coffee Crisis

Tuesday, June 4, 2013


The crisis in Central America’s coffee industry has gone from bad to worse.

In May, prices fell to about $1.30 per pound for the high quality Arabica, which the region produces.

As Brazil produces more Arabica, prices have reached their lowest level in four years.

Worse, there is not even much coffee to sell at this price, given the impact this year of the coffee-rust plague, which has destroyed nearly half of the region’s harvest.

As far as price is concerned, $1.30 is about 20 cents per pound less than what most coffee producers need to cover costs, let alone make a profit, according to an estimate by the Financial Times.

Meanwhile, losses caused this by rust could amount to about $500 million, according to a study by the London-based International Coffee Organization.

Pesticides used in order to treat the affected areas could cost $125 million, the study said.

However, pesticides should be treated with caution.

If not applied correctly, damage to the crop could make the cost even higher.

The International Coffee Organization is working with scientific institutions to combat the scourge. It is also working with the World Bank, to see how the Bank may develop financial instruments, which can help small farmers cover the costs of replanting.

Bad news for the coffee sector creates major social problems.

More than 2 million people work in Central America’s coffee industry in, and has already shed 370,000 jobs.