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Annual Price Declines a Threat to Peru’s Organic Coffee Sector

Peru Andes Mountains coffee highlands

“Clouding Over” by Nicolas Rénac. CC BY-SA 2.0 license.

A world leader in high-quality organic Arabica coffee production, Peru has struggled to rebound from the leaf rust outbreak that peaked there in 2014, affecting nearly half the country’s coffee farms.

A fundamental part of this struggle has been the fact that as coffee production costs have risen, country-wide export prices have declined for four straight years, from approximately $1.82 per pound ($4.03 per kilo) in calendar year 2014 to $1.31 per pound in 2017, according to the latest annual report on the Peruvian coffee sector from the USDA’s Global Agriculture Information Network (GAIN).

With harvest season currently underway in Peru, GAIN estimates that country-wide production of green coffee will be 4.3 million bags in market year 2017/18, a 5 percent increase over last year, while exports are expected to increase at a similar rate. The United States remains by far the top buyer of Peruvian coffees, accounting for 24 percent of the country’s exports last year.

Virtually all of the Peruvian coffee brought into the United States is organic Arabica — whether or not it is certified as such — with the leading varieties by volume being Typica and Caturra, followed by other varieties such as Catuai and Bourbon. The vast majority of Peruvian coffee is shade-grown — although some independent sources suggest this may be changing — hand-picked and sun-dried.

Peruvian coffee arabica organic

“Coffee beans” by Nicolas Rénac. CC BY-SA 2.0 license.

All of this paints an idyllic picture for the vast potential of Peruvian coffee in the specialty coffee market, yet beyond infrastructure-related restraints, economic restraints on farmers are currently the most inhibiting factors in the sector, according to the GAIN report, leading many farmers to abandon coffee in favor of higher-paying but illegal coca production.

“Poor access to credit places constraints on many of the smaller coffee producers,” the report states. “Peru’s private banks reportedly refuse to accept untitled land as loan collateral, forcing most producers to obtain credit either from coffee buyers or informal lenders. The result of which is that small producers are burdened with fixed price sales contracts and or high repayment interest rates.”

According to the GAIN report, large cooperatives such as the well-organized Cenfrocafe and various government health and tourism initiatives have provided some measure of assistance to farmers on a wide scale, yet low international prices remain a persistent threat to the sector.

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