Mexico City, Oct. 24 - Coffee producers in Central America and most parts of Mexico expect to see the new 2007-08 coffee harvest posting a healthy recovery in production and for the first time in almost a decade put social crisis and a production slump behind them.
Producers and traders agree that weather and flowering for the 2007-08 crop, for which physical harvesting recently started in lower-altitude farms, were good and with only a few exceptions the harvest is expected to rise for the second or third consecutive year in most countries.
"This year we will finally see the start of a real recovery in the production with the harvest expected up almost 20% from last year," Ricardo Espitia, executive director of the El Salvadoran Coffee Council, told Dow Jones Newswires.
Total coffee production in the 2007-08 harvest is seen up 6.9% to 12.546 million 60-kilogram bags in the five Central American nations of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, according to forecasts by the official coffee organizations in the countries.
This compares to total production of 11.732 million bags in the 2006-07 harvest from the five countries. Total output in Mexico, meanwhile, is seen stable compared to the 2006-07 cycle (October-September) of about 4 million bags.
"In the 2006-07 cycle we saw exports up 15%, it was a good harvest even though many parts of Chiapas still are suffering from the effects of Hurricane Stan and the new harvest should be similar," said Rodolfo Trampe, a Mexican grower in the country's largest producing state of Southern Chiapas.
Adverse weather caused havoc in the region's coffee lands two years ago when Hurricane Stan first devastated key coffee-producing areas across southern Mexico and Guatemala, and a volcano eruption dealt a heavy blow to Salvadoran coffee farms in the key Santa Ana growing region.
This delayed the recovery from the 2000-04 coffee crisis when international prices fell to historical lows and caused an unprecedented social emergency in producing areas across the world, leading to a sharp rise in poverty, malnutrition, hunger and soaring unemployment.
But traders and producers now agree that the new harvest should put the region back on track as one of the most productive in the world, with yields having made a healthy recovery and farms being in the best shape seen in almost a decade.
"You can't underestimate the damage that was done because of the crisis but now you've had prices above $1 a pound for four years in a row," said one U.S. trader by telephone from New York.
"That's why you now can expect El Salvador to increase its production by 19% and that's why Honduras is going to increase output for another consecutive year, and why the harvest is up in all of Central America," he said.
Production Recovery Also Seen In Lower Altitude Regions
Another trader noted production was even bouncing back in lower altitude regions, areas which across Mexico and Central America temporarily were abandoned during the crisis because the lower grades were sold at discounts to a market that was already trading below cost of production.
"These areas have a low cost of production and with prices where they are today you've seen yields going up again after three years of prices at levels which had led to these areas being abandoned," said the trader.
Producers say the main reason for the jump in production owes to much-improved farming practices, timely and adequate inputs such as fertilizer, and much better husbandry, maintenance and weeding of cultivated areas.
"We had a winter with good weather for coffee and the flowerings have therefore been good, with most of the areas getting flowerings that were between average or higher," David Valeriano, general manager of the Honduran Coffee Institute, or Ihcafe, told Dow Jones Newswires.
"But the most important reason for this increase is that the producers have taken really good care of the farms during the last two years; they have provided fertilizer and renovated and replanted trees so the average yields have gone up," said Valeriano.
Traders agreed with this assessment, saying that producers in all of Central America and most of Mexico had made a significant recovery from the crisis.
And with current prices staying well above $1/lb producers were now in a position to take advantage of the market and reap some healthy economic benefits.
"Producers are in general certainly better off today than where they were a few years ago and the prices have allowed for a positive return and given the financial incentive needed to provide essential inputs," said the U.S. trader.
Despite the overall positive outlook from the region's producers, some concerns remain about the potential problem of a labor shortage as people from poor and rural farm areas migrate in rapidly increasing numbers to cities or the U.S.
Coffee farmers also complain of the ripe competition for labor from fruit plantations where manual labor is considered much easier than the intensive hard work involved in picking coffee on curvy mountain slopes.
But despite producers from Costa Rica in the South to Mexico in the North complaining that available labor is scarce and increasingly expensive, traders said it's still early and normally producers resolve such issues during the harvest.