TEGUCIGALPA, Honduras – Usda’s new annual report on the Honduran coffee sector sees production for market year 2021/22 at 5.5 million bags, down 12% from the previous year. The decrease assumes wet weather conditions that promote leaf rust incidence and accounts for fertilizers given by the Government of Honduras (GOH) to over 91,500 small and medium coffee producers.
These producers account for 87 percent of all Honduran producers and contribute 84 percent of Honduras’s total coffee production.
By providing fertilizer, the GOH aims to increase overall coffee production, which contributes five percent of the gross domestic product (GDP) and 30 percent of the agricultural GDP. The Honduran economy depends on coffee export revenue to generate foreign exchange.
The COVID-19 pandemic and Hurricanes Eta and Iota did not significantly impact MY 2020/21 coffee production directly in Honduras. However, both phenomena had a significant impact on trade and are expected to also impact MY 2021/22 coffee exports. Honduras remains the largest coffee producer in Central America, third in Latin America, and fifth globally.
The export forecast for MY 2021/22 is 5 million bags. This estimate takes into account the forecasted decrease in production. Exports of specialty and certified coffee now amount to 54% of the total.
Honduran coffee production
Honduran coffee is grown at high altitudes, with 61 percent of farms located between 3,900 and 5,200 feet above sea level. Coffee is grown in 15 of the 18 Honduran departments (similar to states) and in 210 (70%) of the 298 municipalities. During MY2019/20, 120,000 coffee producers registered their production with the Honduran Institute of Coffee (IHCAFE). MY2020/21 IHCAFE data is currently being collected.
Coffee production for MY2021/22 is forecast to be 5.5 million bags, twelve percent lower than the updated estimate for MY2020/21 and the lowest since MY 2015/16. A higher incidence of leaf rust and other diseases is expected to reduce coffee production directly by reducing yields and indirectly by rendering more plants unable to produce.
Weather conditions are forecast to remain favorable for leaf rust (neutral, with no significant La Nina or El Nino effect) during the rainy season (May-November) with moderately higher precipitations than the past two years. In addition, COVID-19 incidence is expected to remain high in Honduras during MY2021/22 due to low vaccination coverage.
Therefore, biosafety protocols that include 6 ft distancing for plantation maintenance and harvest activities are expected to remain in place. Also, 2183 km of roads damaged by hurricanes Eta and Iota are still pending reconstruction or repairs. GOH has extended the Coffee Bonus program with additional US $12.5 million until December 2021, in an effort to provide access to fertilizer for over 91,500 small and medium farmers (87% of total farmers).
The new coffee production estimate for MY2020/21 is 6.2 million bags, only 0.7% below the previous forecast. The impact of COVID-19 pandemic and Hurricanes Eta and Iota have not been significant so far. Leaf rust incidence only spiked in November-December (after the hurricanes) and harvest was delayed about one month, but not impacted, since October and November harvest represent about 1% of the total. About six percent of the MY2020/21 coffee still needs to be harvested.
The majority of the small and medium sized producers do not have access to further credit to invest in farm management, or they are already in debt from previous loans. The lack of maintenance to the coffee farms represents a risk for the spread of coffee rust. In order to help prevent potential negative impacts from the current situation, including COVID-19 related economic stress, the GOH is providing credits at 5% interest rate and guarantees for the coffee and agricultural sector producers. The GOH has also sought other forms of financial support through agricultural equipment and input distributors, and village banks.
The Lempira coffee variety, which was resistant to coffee leaf rust for two decades, was affected by rust in the 2016/17 harvest. In April 2019, studies done by IHCAFE identified 16 new coffee rust strains. The strains have different degrees of virulence and aggressiveness. Further research is being done.
Producers are relying on good agricultural practices to control rust. Immediate post Hurricane Eta and Iota weather conditions favored a 15-25% incidence of leaf rust in five departments of Honduras by the end of 2020. A stronger outbreak is expected during the 2021 rainy season (May-November) due to higher levels of humidity compared to the last two years.
According to IHCAFE, the Parainema varieties that are being used by some farmers are still resistant to coffee rust. Climate variability has also caused other existing pests like the Indian coffee cricket to become more prevalent in dry areas. This pest and others can quickly spread in coffee farms without proper management.
Per capita apparent consumption places Honduras in the intermediate consumption regional group with Panama, Mexico and Guatemala. According to the International Coffee Organization (ICO) annual consumption is estimated at 2.39 kilograms per capita.
The increase in domestic consumption trends comes from the growing presence of coffee bars in shopping malls, gas stations, retail areas, supermarkets, office buildings, and hospitals. A large percentage of the Honduran population is young and is consuming more and different types of coffee drinks. Coffee bars that provide customers with free internet attract students and young people.
Honduran coffee exports
FAS Honduras forecasts that the MY2021/22 exports will be 5 million bags, an 11 percent drop from the updated MY2020/21 estimate (5.6 million bags) and a return to MY2019/20 export levels. A decrease in production due to forecasted favorable conditions for leaf rust is expected to be the main cause for the export reduction.
MY 2020/21 export estimate has been updated to 5.6 million bags. By August 2020 and based on a good rainy season, IHCAFE had forecast to export about 6 million bags by the end of MY 2020/21. However, the GOH’s measures to prevent the spread of COVID-19 have slowed the export process, and demand from Germany and other European countries has decreased due to new confinement measures implemented during the first trimester of 2021.
As of May 4th, 2021 Honduras export value had reached $611 million, 2% higher than MY2019/20 at this point. The lower export volume has been so far offset by a 17% increase in average price per bag ($145.90).
Germany, the United States, Belgium, France and Italy remain the top five destinations for Honduran coffee in MY 2020/21. Honduras has taken advantage of the Free Trade Agreement signed with the Republic of Korea in 2020, which has become the 7th largest export market.
The export value in MY2019/20 was $897 million, a 6 percent decrease from the previous year. That same year, IHCAFE reported an export volume of 5.1 million 60 kgs bags, 25 percent lower than the previous year. During MY 2019/20, Honduras exported to 55 countries at an average price of $124.94 per bag. Honduras remains the 5th largest coffee exporter globally, with 4 percent of the world’s coffee exports.
As of May 4th, 2021 about 4.13 million bags of coffee (74%) of estimated MY 2020/21 harvest is already under contract. Exporter stocks amount to 2.6 million bags (50% of export estimate) and about 12,300 bags of certified, specialty, and micro-lots of coffee (about 0.2 percent of total coffee) that have not yet been sold.
According to IHCAFE, the flow of informal exports is around 300,000 bags. The data is based on observations made at border offices.
According to trade data from the Global Trade Atlas, Honduran imports of roasted coffee for domestic consumption in calendar year (CY) 2018 were negligible at under 100 bags and originated mainly from the United States, Costa Rica, Nicaragua, and El Salvador. Imports of soluble coffee in CY2018 were around 10,000 bags and came mainly from Mexico, the United States, Colombia, Mexico, and Chile. Juan Valdez Colombian coffee is now sold in supermarkets. Coffee shops at malls with local and regional chains are popular. International coffee companies sell their soluble coffee in machines located in malls and office buildings. Additionally, soluble coffee is now available in smaller containers at supermarkets, since the price of soluble imported coffee is higher than local coffee.
Stocks are held by 70 exporters and roasters from the private sector. Ending stocks estimate for MY2020/21 has been adjusted to 1,113 million bags, following a decrease in demand from Europe. The MY2021/22 forecast for ending stocks is 1,264 million bags, a 14% increase compared to MY2020/21.
Coffee beans are stored by exporters as inventory needed to meet future contracts and are not meant to influence price. Honduran roasters keep beans for domestic consumption throughout the year. Some stocks may be released to other Central American countries in the course of the year, depending on price and market opportunities.