Those of you that follow the coffee market have probably been reading about the ‘leaf rust’, or Roya, epidemic that has been sweeping through Central America and destroying coffee crops by the thousands. You have probably been wondering how this will most likely affect coffee prices in the future. Experts believe the world will need to expect higher coffee prices in order for the industry to survive.
Almost half of the plantations in El Salvador, for instance, were wiped out by the disease, and crops in Guatemala, Honduras, Colombia, Nicaragua, and Costa Rica were deeply hurt by the plant disease as well. They are a little more upbeat about Colombia for the time being as they have seen many farmers re-planting their harvests vigorously with roya-resistant trees. However, with this being an off-cycle year (meaning this is a year where we are mostly running off coffee overstock until next harvest in the fall), prices are expected to be higher by this fall.
Coffee industry analyst, Kona Haque, says of the matter, “Given this, in the short term we do not expect New York arabica [futures] to rally too much on the roya news. Equally though, downside is limited, as we expect the range of 130-150 cents a pound to remain for much of the first half of 2013.” She continues, “The world will need to move to higher prices to encourage growers in Central America to expand their coffee plantations. At today’s prices, costs associated with fighting the disease and ongoing structural impediments, the medium term outlook for Central American washed coffee output does not look promising.”
What Haque said basically sums it up – if we want to keep our precious coffee alive and thriving then we will need to lend a hand to coffee farmers by paying a higher premium so they can afford the tools necessary to combat Roya. Pesticides, Roya resistant trees, and fungicides don’t come easy.