Valdosta Daily Times

Business

May 25, 2014

Coffee on the Rise

Leaf rust, drought double coffee prices

VALDOSTA — Full disclosure: I love coffee.

Though I’ve cut back in 2014 to a strict 16 ounces a day, it’s still the first thing I reach for in the morning, and sometimes, foolishly but irresistibly, late into the evening.

So, as you might imagine, I’m not a huge fan of leaf rust.

A fairly common fungal disease identifiable by small circular brown spots on leaves — though they are sometimes reddish, white, yellow, orange and/or black — leaf rust, or “coffee rust” has been tearing through parts of Central America and South America through the past year.

Coffee is the world’s second most traded international commodity — just after oil — making unchecked leaf rust an economically devastating disease.

Part of the reason for the recent rash of leaf rust is climate. Leaf rust flourishes best in wet, high-humidity conditions. For places like Guatemala, for instance, leaf rust wasn’t much of a worry in its long, coffee-growing history.

“Up until last year, they didn’t have to worry about this fungus because it didn’t survive in those locations,” said Ellen Stevens, instructor of economics at Valdosta State University and owner of local coffee roaster and wholesaler The Beanery. “Now that the average temperature has been ever so slowly bumping up around there (they do).”

Fluctuations in the seasons have also led to a decrease in dry seasons, a necessity for coffee cherry blossoms to mature into fruit.

“Between those two things, this fungus has started to move into other areas ... they really weren’t prepared for it.”

There have also been reports of a mutant strain of leaf rust, one better suited for cooler temperatures.

In 2012, Guatemala reported that nearly 40 percent of planted coffee land had been affected by leaf rust. A year later, some estimates put it at 70 percent.

As a result, the price of Guatemalan coffee rose higher and higher, leading The Beanery to switch to El Salvador coffee beans as its mainstay coffee.

While farmers have taken measures against leaf rust, it may be another year or two before that high leaf rust percentage comes down, though Stevens is optimistic.

“Hopefully, next year the crops will come back online to the extent they were before the fungus hit.”

But wait, there’s more.

Brazil, the world’s largest coffee producer is in the middle of a drought, with shortfalls being projected through 2016.

“When we’re buying coffee, the price our supplier quotes me is basically the world’s market cost for coffee. It’s adjusted up or down, according to where it’s from and the grade. That basic world price has bumped up 50 to 100 percent.”

So how does that affect me and the other coffee lovers of the world?

The prices of grocery store coffee will likely rise until the market settles, but most coffee shops keep a steady price on a cup of coffee, which puts roasters in a tricky place during economic downturns.

Unlike, say, gas stations, which change their gas prices daily based on the oil market, coffee shops don’t. A majority of The Beanery’s business comes from selling coffee beans to coffee shops.

Still, after eight years, Stevens and her husband, Tom, have been through the ups and downs of the coffee market, weathering the Great Recession and a surge in coffee futures which increased the price in the past. They kept roasting through it all, getting in burlap bags of green coffee beans and turning them into deep browns.

“Our bottom line is getting squeezed, but you hunker down and try to coast through it.”

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