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Everyone wants fancy coffee, but the farmers growing it are in crisis

Competition has gotten so fierce, and prices so low, that coffee farming has become untenable for many small growers -- leading their adult children to shun the business.

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Chicago/New York: Jose Guillermo Alvarez’s family has harvested coffee plants at the foothills of El Salvador’s Santa Ana volcano for four generations. Their farm, the Malacara estate, gained such prestige that it was highlighted in a 1944 National Geographic feature about the country. Today, its premium beans are renowned for their notes of brown sugar, chocolate and blackberries.

With global demand for specialty brews booming, Malacara should be enjoying a renaissance. But Alvarez is unsure that the family legacy will live on. After a rout in coffee prices, his 27-year-old son has little interest in taking over the business.

“The new generations are not willing to get involved in coffee,” said Alvarez, 62. “My son has accompanied me to the farm since he was much younger. He enjoyed being there — but not enough to be a professional.”

At a time when gourmet coffees are thriving among consumers with increasingly refined tastes, a crisis is growing for the producers. Competition has gotten so fierce, and prices so low, that coffee farming has become untenable for many small growers — leading their adult children to shun the business. 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 Roberto Velez, chief executive officer 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 climbed to 54.9, compared with 53 three years ago.

“Producers are demoralised, and if they could get out of coffee, they would,” Velez 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. More broadly, climate change is clouding the outlook for coffee growing, making it an unattractive career option for would-be heirs.

But in the end, the issue often boils down to pure economics.

A mechanised coffee harvest at a farm in Carmo do Paranaiba, Brazil | Photo: Victor Moriyama | Bloomberg

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 four times 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 also made currency exchange rates for other countries less favorable.

Prices for arabica coffee have spent much of the year below $1 a pound, reaching the lowest since 2005. They’ve rebounded slightly in the past two months, but are still well below the cost of production for many farms, according to Ric Rhinehart, executive director emeritus of the Specialty Coffee Association.

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

Juan Luis Barrios’s family farm in Guatemala currently splits its revenue evenly between coffee and lumber, but his roughly 25 cousins and eight aunts and uncles are increasingly wondering whether the beans are worth the effort and investment. The youngest family members have almost zero interest in working on the farm, which dates back to 1832, he said.

“Cash flow is king,” Barrios said. “There is a lack of interest in the new generation, in one definitely owning farms, and at the worker level working on a farm.”

In Guatemala many small growers are leaving the country, taking the risky trip through Mexico to cross the U.S. 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 so-called 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, well-oiled 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 James Watson, 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, Watson said. 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’s a 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,” Watson said.

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

Guillermo Alvarez, whose father owns the Malacara estate, left El Salvador in 2010 to study supply chain management at Texas Christian University in Fort Worth. He speaks with deep pride about his family’s coffee heritage. But he doesn’t see farming as a viable source of income.

“I don’t think it’s a lack of interest, but a lack of security and probably financial well-being,” said Alvarez. “I love it. I really do. But at this point in my life, I don’t think it’s prudent to go back home and live off of that.” –Bloomberg

Also read: Drinking very hot tea or coffee daily can increase risk of cancer by 90%, says large study


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