Coffee farmers to lose millions
Published:Friday | July 23, 2010 | 12:00 AM
Avia Collinde, Business Writer
GREEN BEANS are piling up at the Coffee Industry Board (CIB) which says about 40 per cent of supplies are unsold, even as it searches for new markets on three continents.
The CIB says as dealer prices continue to fall and if negotiations fail to secure buyers, some farmers could find themselves operating at a loss by yearend.
Coffee dealers earned 10-12 per cent below last year's prices for the first 36 per cent of the crop, according to CIB head Christopher Gentles, who said prices on the rest of the crop could fall 23 per cent for unsold inventory.
"The result is that many dealers are offering the farmers payment of $3,200 per box for Jamaica Blue Mountain coffee," Gentles said, Tuesday.
"High Mountain coffee prices are also depressed, at J$1900 to J$2,100, which is J$300 to J$400 less than last year's crop. Some coffee dealers still have not yet paid for the farmers' coffee, as they are awaiting markets."
Jamaican coffee farmers "will lose approximately J$100 million" on this year's sales, the CIB head said.
In early July, coffee dealer Wallenford posted notice in local papers advising its partner farmers that the final payment for crop year 2009/10 would be delayed.
"The WCC is in the process of seeking sale opportunities in non-traditional markets for premium and non-premium exportable green beans and is hopeful that these initiatives will be successful in the short term," the notice read.
Even at the reduced price being offered by some dealers, Gentles noted, "the reality is that, based upon the quality of coffee purchased in some regions and the current pricing of the inventory, many of the coffee dealers will lose money at this price."
Farmers, he said, have had their own troubles with fields hit by drought, defective beans with Berry Borer damage and shrivelled beans caused by unhealthy plants. Overall, Gentles outlines, the recession has had the most severe impact upon the cash flow to the coffee exporters and, consequently, to the coffee farmers.
The coffee crop runs from August to July. The coffee in inventory is currently the subject of negotiations, and push for markets in the United States, Russia and China even as Japan retreats from purchase deals that once gave that country up to a 90-per-cent lock on supplies.
Jamaica has already signed a deal with Hangzhou City Coffee & Western Cuisine Association, which represents some 800 cafés, coffee roasters and specialists, as exclusive importer of Jamaican coffee into China, initially for a period of two years.
Only five per cent of Jamaican coffee is consumed domestically, the other 95 per cent is sold abroad through importers and coffee brokers.
Salada purchases a small percentage of the crop, usually less than three per cent, using some to make Mountain Peak instant coffee and other products. Nestle also purchases for use in their products, the CIB says.
Potential new markets for green beans include the United States and Canada, with Gentles promising a more aggressive marketing push on the North American continent.
"The targeted consumer marketing that took place in Japan was not as competently or thoroughly executed by the folks who represent our brand within the United States," said Gentles.
"The CIB, the Ministry of Agriculture, along with our coffee dealers, intend to enroll new partners within this market who have the capability to represent our Jamaican coffees in a much more attractive way, thereby raising the profile of the brand in that market."
Europe is also still being targeted, but this market is not homogenous, so the CIB and its partners are considering targeted market segments.
Some of the countries such as the United Kingdom, Germany and France will probably see more focused efforts in the next two years.
The Hangzhou deal, sealed July 13 and valued at US$1.7 million (J$146m), will not entirely plug the revenue loss being experienced, said Gentles, but "signals our immediate and long-term commitment to diversify our coffee brand, and to develop long-term markets for our coffee. This is the beginning of the implementation of the strategic marketing plan for the diversification of the market for Jamaican coffee."