Premium Beans are in Demand to Make Fine Coffee

Premium Beans are in Demand to Make Fine Coffee

FLASH: Today premium beans are renowned for their notes of brown sugar, chocolate, blackberries and other fine tastes

At a time when gourmet coffees are thriving among consumers with increasingly refined tastes, a crisis is growing for the producers.

Competition has gotten fierce, and prices so low, that coffee farming has become untenable for many small growers.

Properties that have been passed down through generations are now facing the prospect there will be no one to take them over, leaving owners little choice but to shut down, sell their land or switch to other crops.

The drama in the fields is enormous,” said CEO of the Colombian Coffee Growers Association. In a recent survey, 68% of the country’s regional coffee leaders said they have no young people to follow them into the farm. The average age of the crop’s farmers has risen to 54.9 anni, compared with 53 just a few years ago.

“Producers are demoralized, and if they could get out of coffee, they would,” the CEO said.

There are varied reasons successors are getting harder to find. Political and socioeconomic instability across much of Central America’s coffee-growing centers are fueling a population exodus.

Countries including El Salvador, Ecuador and Honduras have been hit by a fungal disease known as leaf rust, which decimated crops and made them more expensive to maintain, thus making it an unattractive career option for would-be heirs.

Smaller farms have been pressured by a surge in supply from Brazil, which has accelerated output in recent years with highly mechanized production.

Growers in Latin America’s biggest country can harvest as much as 4X the coffee per hectare than farmers in places such as El Salvador or Nicaragua, where beans are often hand-picked by workers on the side of a mountain. The depreciation of Brazil’s Real has made currency exchange rates for other countries less favorable.

Prices for Arabica coffee have spent much of the year below $1 lb, reaching the lowest since Y 2005, well below the cost of production for many farms, according to the executive director emeritus of the Specialty Coffee Association.

Recent gains have done little for farmers outside of a few geographies, mostly Brazil,” he said. “The lack of interest from the next generation of potential coffee farmers continues unabated.

In Guatemala many small growers are leaving the country, taking the risky trip through Mexico to cross the US border, according to Catholic Relief Services, a not-for-profit organization that works with producers in Central America.

All of this points to trouble ahead for the booming gourmet coffee market. 

Small farms have been a driving force in the production of niche varieties, so closing those farms could diminish the supply of the premium beans that have become increasingly popular. The share of gourmet or specialty brews consumed in the past day among drinkers reached a record 61% this year, according to the National Coffee Association.  

Many millennial and Generation Z consumers are placing a greater premium on quality over quantity valuing small growers connected to the land more than industrial-sized farms mass producing commodity beans.

Customers often look for roasters to forge relationships with farmers and for their cups of coffee to offer novelty and discovery, said an analyst for agricultural lender Rabobank.

The succession issue may not be evident immediately to consumers, but the industry, particularly traders and importers connected to what’s happening on the ground are thinking about what the landscape will look like in 10 or 20 years.

The long-term concern for roasters is that supplies will increasingly be concentrated in Brazil and Vietnam, the world’s biggest grower of the robusta variety that’s commonly used in instant coffee products.

There is the risk that it will be harder and harder to get a wide variety of origins, where the trend is to increase the number of single-origin products.

Meanwhile, small farmers are thinking hard about what role coffee will play in their future, said the director of sourcing and shared value for Intelligentsia Coffee Inc. With prices around or below $1 lb, “it makes it very hard to make a compelling case to young people,” he said.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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