News Column

Coffee Crunch

August 28, 2014

By Nathan Payne, The Record-Eagle, Traverse City, Mich.



Aug. 28--TRAVERSE CITY -- Steam billowed from the surface of Bob Kansa's coffee into the cool morning air, wafting skyward -- the same direction industry experts expect coffee prices will go.

That morning cup of joe, cream included, was a luxury for Kansa and his wife, Connie, while they vacationed in northern Michigan. They huddled at an outdoor cafe table along Front Street, warming their hands on the white paper cups and breathing in the eye-opening aroma.

The downstate couple didn't notice when they paid a few extra cents per cup -- most coffee consumers wouldn't bat an eye at an extra dime tacked to the price of their favorite $4 latte. But price fluctuations are the only evidence in the U.S. of a coffee crisis raging in the Southern Hemisphere -- a combination of drought and tree-killing fungus.

Thousands of miles south of the Kansas, in Brazil, the biggest coffee producer in the world, drought damaged the 2014 coffee crop. They had no idea Brazil exported about 18 percent less coffee this year than last, according to the National Coffee Council.

They also knew little about "la roya," or rust, a plant fungus that decimated coffee crops throughout Central America.

"I read about that," said Bob Kansa, referring to news during recent months. A year ago, few outside of the coffee industry would perk up their ears at the mention of dwindling coffee crops.

"People can enjoy their morning cup of coffee and not even need to worry about how their coffee was grown," said Chris Treter, director and co-founder of Higher Grounds Trading Company. Treter takes a pretty big interest in how unroasted coffee beans make their way from tree to cup.

"We're one of a few coffee roasters in the country that are 100 percent fair trade."

Traverse City'sStone Hut Studios produced the documentary film, "Connected by Coffee," about Treter and another coffee roaster during a 1,000-mile journey through Central America to meet and document the people who grow and pick coffee. Today two of the four co-ops the roasters visited have no coffee and the other two lost half of their crop.

Treter now is working with On the Ground, a nonprofit he helped found, to support its Project Nica, a project raising money to help Nicaraguan coffee farmers respond to the coffee rust epidemic.

"La roya" appeared in Central American coffee crops a handful of years ago, but this year caused widespread damage. The fungus kills entire fields of coffee trees. It's a setback from which it takes poor farmers about five years to recover.

Treter compared the devastation to the frost that destroyed the cherry crop in northern Michigan in 2012 -- if that disaster killed entire orchards of trees.

"I've seen a lot of it and a lot of our partner farmers are being impacted by it," Treter said. "Last year I visited four co-ops. Two of them didn't export anything this year."

The problem became so severe that USAID in June joined forces with several major coffee companies and cooperatives to provide $23 million in aid to coffee farmers impacted by rust. The effort involves coffee buyers paying an extra 5 cents per pound of coffee they import into a "rust" fund tripled by USAID, Treter said.

"It's a long term problem," Treter said. "In the long term I foresee coffee prices skyrocketing. ...Once you have the coffee rust, you have to cut the tree down. You don't have anything for three years (the time it takes before new trees fruit)."

A few miles down the road from Treter's roastery workers at Great Northern Roasting Company heaved tubs of smoking-hot, fresh-roasted coffee beans out of the company's roasters while owner and roastmaster Jack Davis walked around a stack of burlap bags of unroasted beans.

The bags boasted labels from almost every coffee producing country, including some from those countries hardest hit by rust.

"This is not an overnight problem," Davis said. "Roya has been coming. It usually takes historic events to make people take notice."

Davis pointed to a few major crises and corresponding spikes in coffee prices during his 13 years importing and roasting beans. The coffee market is normally pretty volatile, and prices on futures markets like the NASDAQ rose about 20 percent during the past six weeks.

"When I got into this business, prices were under $1," Davis said. "Three years ago, my prices went sky high. Prices went up 40 percent on the shelf."

Higher prices don't directly benefit farmers who often sell their coffee in advance at prices set months before the harvest, Davis said.

"Higher prices do not automatically mean higher income for the grower," he said. "But it does lead to more stability."

Prices aren't going to be the only problem. The declining output from many coffee producers means importers and roasters may not be able to get some coffees.

"Next year is going to be a problem," Davis said.

Davis helped a group of Costa Rican growers plant rust-resistant trees some time ago. The trees cost about five times as much as the traditional varieties, but they helped those farmers weather the storm.

"We partnered with our suppliers; that makes us look really smart right now," Davis said.

Both roasters expect consumers will continue to see rising coffee prices in the next year, but few make the connection between prices at home and the crisis elsewhere.

You can watch a streaming version of "Connected by Coffee" at www.connectedbycoffee.com.

___

(c)2014 The Record-Eagle (Traverse City, Mich.)

Visit The Record-Eagle (Traverse City, Mich.) at record-eagle.com

Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Record-Eagle, The (Traverse City, MI)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters