Why is Honduras arabica coffee production dropping so sharply?

Honduras, Central America's largest producer of washed arabica coffee, is expected to produce 5.5 million bags in the 2023/24 season, down 24 percent from the previous year, according to a U.S. Department of Agriculture report. Exports are forecast to fall from 6.2 million to 5 million bags, a 19 percent decline, with drought, coffee leaf rust, and labor shortages behind it.

The country logged its hottest, driest year since 1992, with highs of 38 to 40 degrees Celsius, and more than 150,000 hectares of forest burned. Smoke and pollution triggered alerts in the Central District. The government has introduced tax exemptions and is pursuing free trade talks with markets such as China to ease pressure on coffee production and farming communities.

The latest report from the U.S. Department of Agriculture shows that Honduras, Central America's largest producer of washed Arabica coffee, is facing a severe test. In the 2023/24 fiscal year, the country's coffee production is expected to reach only 5.5 million bags (60 kg per bag), a sharp drop of 24% from the previous year, while exports will also fall from 6.2 million bags to 5 million bags, a decline of 19%. Extreme heat and drought, a large-scale outbreak of coffee leaf rust, and persistent labor shortages are the core factors behind the decline in production. At the same time, the Honduran government has introduced tax-exemption policies and is accelerating free trade negotiations with markets such as China in an attempt to provide relief for coffee farmers. This article will combine the USDA report with data from the Honduran Coffee Institute to comprehensively analyze the ins and outs of this industry crisis.

Recently, the U.S. Department of Agriculture released a report on the state of Honduras's coffee industry. The report noted that although Honduras is Central America's largest producer and exporter of washed Arabica coffee, its production has recently declined significantly due to a series of problems.

The report shows that Honduras's coffee production in the 2023/24 fiscal year is expected to be 5.5 million bags (60 kg per bag), down 24% from the previous year. Behind the decline in production is the interplay of multiple factors, including weather changes, a high incidence of coffee leaf rust, and persistent labor shortages. Affected by this, exports in the 2023/24 fiscal year are expected to be 5 million bags, down 19% from 6.2 million bags in the 2022/23 fiscal year.

Recently, Honduras has been in summer, but affected by the El Niño phenomenon, the country's temperatures hit new highs and it experienced its hottest and driest year since 1992, with maximum temperatures reaching 38-40°C. The hot and dry weather led to frequent fires, with large areas of mountain forest engulfed in flames. According to statistics, more than 150,000 hectares of forest have been affected this year.

Gases released by forest fires, combined with vehicle emissions, industrial exhaust, and other factors, caused the Central District (Distrito Central) of Honduras to launch an indefinite red alert in early May due to severe air pollution. Then on the 20th, 7 of the country's 18 departments launched a red alert, 2 departments launched a yellow alert, and the remaining 9 departments were in a green alert state.

It is understood that in the incidence threshold for coffee leaf rust, 0-5% is a relatively low level, and 5-20% is a moderate level. Affected by weather conditions, coffee leaf rust is highly prevalent in Honduras, with an average incidence rate of 5.8%.

Specifically, the incidence rates in La Paz (9.7%), Francisco Morazán (8.2%), Comayagua (6.9%), Copán (6.2%), Cortés (5.9%), Santa Bárbara (5.8%), El Paraíso (5.7%), and Olancho (5.2%) are all relatively high.

Currently in May, Honduras is still in summer, but by June it will usher in the rainy season. Coffee rust spores spread with rain and wind, and the incidence rate may rise further by then, ultimately continuing to affect production in the new season.

In addition, poor production has also affected coffee exports. According to data from the Honduran Coffee Institute (IHCAFE), from January to early May, Honduras exported 2.88 million bags of coffee, down 8% from 3.13 million bags in the same period last year. According to border office statistics, another 300,000 bags of coffee flowed through informal export channels into neighboring El Salvador, Nicaragua, and Guatemala.

However, the government has already begun taking action. Through an administrative decree, it will approve an exemption of the 12% sales tax on coffee, aiming to reduce production costs. In addition, Honduras's central bank continuously reviews its monetary, credit, and foreign exchange policies every year in order to reduce the impact of prices on coffee production and consumption and increase coffee farmers' incomes.

At the same time, the fifth round of negotiations on the China-Honduras free trade agreement was recently held in Tegucigalpa, the capital of Honduras. The two sides conducted comprehensive and in-depth consultations on areas such as trade in goods, trade in services, investment, and rules, and made positive progress, which will help increase exports of coffee and other goods to China.

The above content is compiled by CoffeeHunters, a coffee news website.