What Is Pushing the Central America Coffee Industry Higher?
The coffee industry across Central America is under strain from drought, irregular rainfall, and labor shortages. Costa Rica expects its 2023/24 harvest to drop about 13 percent from the previous season. Nicaragua faces drought through mid-May and heavy emigration, while Panama's canal drought and worker protests have delayed harvesting and lifted shipping costs.
Those combined factors are keeping international coffee prices high. In Costa Rica, unstable rain can make coffee trees flower early and encourage microorganisms, so farmers plant more shade trees, adding labor demand. Falling farmer numbers and shifting migration flows have also reduced the temporary workers who once handled collection.
The coffee industries in several Central American countries have recently encountered multiple challenges. Costa Rica is expected to see a production decrease of about 13% in the 2023/24 season due to unstable rainfall and labor shortages. Nicaragua, affected by El Niño, is experiencing drought that will persist until mid-May; political factors have led to a large wave of emigration, and labor shortages threaten harvest quality. The drought crisis at the Panama Canal remains unresolved, shipping costs are rising, and labor protests have delayed coffee harvesting. Together, these multiple factors are keeping coffee prices high.
Recently, according to Reuters, several coffee-producing countries in Central America are facing different difficulties, and the coffee industry has suffered notable shocks. Costa Rica has been dragged down by weather conditions, with rainfall leading to lower production. Nicaragua expects the impact of El Niño to continue until mid-May, and the drought situation may only ease from July to September, while labor shortages are also prominent. Panama's situation is the most severe: the canal crisis remains unresolved, drought continues, and shipping disruptions have become an important driver of recent coffee price increases. In addition, Panamanian workers have launched protests, causing delays in coffee harvesting.
Costa Rica
A forecast recently released by the Costa Rican Coffee Institute (ICAFE) shows that, due to the dual impact of irregular recent rainfall and labor shortages, the country's 2023/24 coffee harvest is expected to decrease by about 13% compared with the 2022/23 season. Costa Rica is currently experiencing windy weather and heavy rainfall, with rainfall timing difficult to predict. Unstable rainfall may cause coffee trees to flower prematurely, while excessive rain can also breed more microorganisms. For this reason, farmers need to plant more other trees to shelter the coffee trees from wind and rain, which further increases the burden on labor.
A report by the U.S. Department of Agriculture's Foreign Agricultural Service (FAS) on Costa Rica points out that the number of coffee farmers in the country is continuously declining. In the past, most coffee collection workers came from Nicaragua and Panama as temporary foreign workers. However, with changes in migration flows, a large number of Nicaraguan workers have chosen to emigrate to the United States or elsewhere and no longer go to Costa Rica, resulting in a severe labor shortage.
Nicaragua
According to a climate analysis report released by Nicaragua's Natural Phenomena Observatory (Ofena), the impact of El Niño on Nicaragua will continue until mid-May, and the drought situation is expected to improve from July to September.
In addition, because Nicaragua's political situation continues to deteriorate, the number of emigrants has recently been higher than historical levels, with an estimated 200,000 Nicaraguans choosing to emigrate. Many coffee production organizations have expressed concern that labor shortages may reduce the quality and quantity of the 2023/24 harvest.
Panama
According to the U.S. website Fortune, the drought crisis affecting the Panama Canal will persist for several years. Under normal circumstances, the Panama Canal handles about 3% of global maritime trade volume and 46% of container traffic from Northeast Asia to the U.S. East Coast. It is also Panama's largest source of revenue, bringing in $4.3 billion in 2022. At present, the canal's maximum daily transit volume is only 24 ships, down from 38 ships per day previously. It may deteriorate further in the future and cannot recover quickly in the short term; this situation could last for several years. Other countries are currently considering alternative shipping routes, but this will increase transportation costs and time, which is also one of the reasons coffee prices are currently at high levels.
Recently, protests and demonstrations have continued in many parts of Panama. The reason for the demonstrations is the Panamanian government's earlier decision to restart domestic copper mining operations. The demonstrators are mainly environmentalists and community groups, many of whom are workers on coffee estates, because open-pit copper mining causes severe environmental damage. It was not until mid-December that the Panamanian government ordered the Canadian mining company First Quantum Minerals (FM) to suspend operations at its flagship copper mine in the country. However, the ongoing protests and demonstrations have already caused Panamanian coffee workers to delay their work.
The above content is compiled by CoffeeHunters, a coffee news website.
