During the opening session of last week’s Coffee Rust Summit in Guatemala, the director of Central America’s coffee institute suggested that coffee rust is a symptom of underlying problems in the region’s coffee sector. More specifically, he noted that the coffeelands in Central America are filled with aging plantations that are poorly managed. What he didn’t say was that the weakness of the region’s coffee programs has contributed to the current state of its coffee fields.
If the coffee rust epidemic is a symptom of underlying agronomic and institutional failures, then its economic and social impacts on farmers are symptoms of the underlying economic vulnerability of coffee-growing households.
Even before the coffee rust epidemic, coffee farmers — particularly the smallholder farmers CRS works with — were facing extraordinary financial pressures due to production risk on the farm and price risk in the marketplace.
On the farm.
- Small farms are getting smaller. In many cases, small coffee farms are getting even smaller over time through inheritance, subdivision and the occasional sale of land to meet acute cash needs. In order for farmers to squeeze the same amount of coffee income out of farms that are getting smaller, they need to achieve greater efficiencies and higher yields in smaller areas. Unfortunately, many smallholder farms are moving in the opposite direction.
- Productivity is lagging. Thanks to the issues cited above — aging plantations and poor farm management — productivity is lagging throughout Mesoamerica, and the region’s coffee institutes have had limited success in helping farmers reverse the slide.
- Pathways for pests and pathogens. Under these conditions, pests and diseases thrive. A plant’s natural defenses wane over time. Only effective pest and disease management can compensate for a plant’s age. Aging plants coupled with poor farming practices paves the way for pests and pathogens. Add climate change to the mix, and we have a perfect storm for plagues and epidemics. As climate change accelerates, the threats to coffee production will only multiply.
- Coffee is king. Coffee growers have not diversified their production or their income streams enough to be resilient in the face of crises like the coffee rust outbreak. CRS is conducing a survey of the impacts of coffee rust on smallholder farmers in Central America. So far we have interviewed leaders from 13 cooperatives with more than 6,800 members. The data show that an average of only 23 percent of their members had access to income-generating activities besides coffee farming. But many coop leaders told us that the overwhelming majority of their members — 90-95 percent — are entirely dependent on coffee for their incomes, and therefore highly vulnerable to shocks to production. Smallholder farmers’ exposure to risk is hardly lower in the marketplace.
In the marketplace.
- Rising costs of inputs. The costs of agricultural inputs are on the rise.
- Multiplier effect. Rising costs of inputs create a multiplier effect on costs of production when combined with falling productivity. Farmers face a number of fixed costs in producing coffee — costs that don’t change regardless of how much coffee they produce. So when farmers bring less coffee to the market thanks to falling production or epidemics of diseases like coffee rust, it costs them more to produce each unit. In order to remain profitable, farmers need to cover rising costs of production with increases in the prices they earn at market. In recent years, it has been hard to count on the market to deliver steadily rising returns.
- Extreme market volatility. For factors unrelated to the amount of money it costs a farmer to produce one, the price of a pound of coffee has fluctuated wildly in recent years, increasing the risk to farmers who need high prices to break even.
The economics of the small-scale family coffee farm were already highly precarious before the coffee rust crisis. Some coffee growers may choose to throw in the towel in the face of the current crisis. Those who don’t will be more resilient if they can diversify some of their production out of coffee to hedge their risk, diversify their new coffee plantations between susceptible and disease-resistant varieties as a further hedge against risk, and manage their farms toward the higher yields they need to achieve and sustain profitability. Building stronger coffee programs throughout Central America will be critically important in helping them achieve these goals.