Mexico coffee leader touts state control of prices to help farmers

MEXICO CITY: Mexico's top coffee association is pushing for the creation of a new government agency that would have the power to regulate and set prices with the goal of improving livelihoods for legions of coffee farmers, the group's leader told Reuters.

President Andres Manuel Lopez Obrador's made a campaign promise to create such an agency along with minimum price guarantees and generous subsidies to coffee farmers. A bill has recently been introduced in Congress by a ruling party senator that proposes a similar approach.

The new agency should have its own budget as well as offer financing and marketing help for the country's mostly small-scale, cash-strapped farmers, said Luis Herrera, head of the coffee association, AMECAFE.

"What we want is for prices to be regulated and that we have fair prices that allow farmers to recover their production costs and earn a small profit," he said in an interview on last week, adding that coffee buyers and industrial market players should also participate in the new agency.

Price controls for coffee were mostly abandoned years ago due to the difficulty of reaching global agreements on supply, exposing farmers to sharp price crashes. In 2019, the world's third-largest producer, Colombia, introduced subsidies for coffee growers and, along with Brazil, called for supply caps.

Lopez Obrador has authorized price floors for other agricultural commodities, including Mexico's staple corn, but has to yet to carry through on most of his coffee campaign promises.

His spokesman did not respond to a request for comment.

Mexico is the world's tenth biggest coffee producer with around 500,000 farmers scattered across the country, mostly concentrated in the lush, mountainous states of Chiapas, Oaxaca and Veracruz.

Herrera, an organic coffee farmer from Chiapas, said coffee farmers currently only receive a maximum annual benefit of 6,200 pesos ($308) through a direct cash-payment agriculture program aimed at small farmers.

While some 180,000 coffee farmers are currently enrolled in the program, and the government has pledged to add another 70,000, he stressed more support was needed.

"It's not enough," said Herrera.

Five years ago, Mexican coffee hit a decades low of just 2.3 million 60-kg bags, in large part due to a large-scale outbreak of the tree-killing fungus roya.

Herrera sees coffee output during the current 2020/2021 season totaling 4.0 million bags, down from a previous estimate of 4.2 million bags.

"But it could be less," he said, noting that 2020/2021 coffee exports are forecast at 2.8 million bags, down from a previous estimate of 3.0 million bags.

The latest export estimate would still mark a nearly 4% increase from the previous cycle.

Herrera said roya continued to have an impact and that pandemic restrictions prevented at least 40% of seasonal Guatemalan coffee workers from entering the country to help pick this year's harvest.

He described both as "serious problems," but singled out the fungus as especially worrisome.

"The roya problem now has a lot to do with climate change," he said, explaining that warmer farms with less shade have been especially hard hit.

New trees marketed as roya-resistant and widely adopted have not lived up to the hype, especially Costa Rica and Oro Azteca varieties, he said.

In a bright note, Herrera said he expects annual double-digit growth to continue for certified organic coffee production, part of a trend for certification programs that can offer farmers higher prices for some beans, like fair-trade coffee embraced by industry giant Starbucks.

Output for the premium organic crop is projected to rise by around 25%, up from about 275,000 bags produced last cycle, Herrera said.