Sun shines brightly on RP coffee industry

AMADEO, Cavite – Prospects are bright for local coffee farmers, buoyed by rising demand and tight global supply.

"There are still sharp fluctuations in local prices which reflect price movements in the global market, but this year is projected to be a generally positive year for local coffee farmers," said Nicholas Matti who owns a coffee mill plant and is also the chairman of the National Coffee Development Board (NCDB) which is spearheading national efforts to revitalize the Philippine coffee industry.

Matti said local coffee production this year, while not substantially higher than last year’s level of 30,000 metric tons (MT), will continue to enjoy fairly good prices as the world’s biggest coffee producers are experiencing production problems.

Brazil, the top coffee producer worldwide, is cutting down production due to a seasonal crop rotation while Vietnam, the second biggest producer, is experiencing an extended dry spell, forcing it to scale down planned production.

On the other hand, Indonesia, another major coffee producer, is also reportedly assessing the impact of a recent earthquake that hit its coffee plantations.

Talks at a recent international coffee seminar in Rio de Janiero, Brazil that world coffee production won’t be sufficient until 2007, drove coffee prices in the commodity futures market to an average of $1,000 per MT and even peaked at about $1,2500 per MT last month.

The shortfall in supply comes amid increasing demand, bolstered by the emergence of new coffee consumers such as China, Japan Russia and Eastern Europe, prompting major processed coffee sellers to focus on these rising markets.

While tea still dominates in much of Asia, coffee is becoming increasingly popular in the region, with packaging, specialty and instant blends gaining favor for the rising number of consumers.

Matti said these developments augur well for the struggling Philippine coffee industry and should encourage government to support efforts to accelerate efforts to increase production to self-sufficiency levels and bolster exports.

"It is now a sellers’ market and we could still be able to ride on that wave. Even if we produce just enough for local coffee consumption, the coffee industry will continue to thrive," said Matti.

Currently, local production at about 30,000 MT yearly, is grossly inadequate to meet the 65,000 MT annual demand.

"We are importing 35,000 MT of coffee and that is a hefty P1.5 billion and it will keep going up as long as world market prices rise. It makes sense for the country to be growing its own coffee and then further develop the export market," Matti told coffee enthusiasts led by Agriculture Secretary Arthur Yap and Philippine Star publisher Maximo V. Soliven while conducting a tour of his plant.

Local coffee production consisting of Robusta, Arabica, Excelsia and Liberica varieties was high in the 1980s but plunged in the 1990s when world market prices collapsed. This discouraged farmers who cut their coffee trees, converted to higher value cash commercial crops while others sold their farms to property developers.

The country briefly exported coffee in 1986 when it shipped out $140 million worth of high-quality coffee beans, particularly the Liberica variety or Kapeng Barako to the Middle East and other foreign markets. Today, exports average at a measly $1 million annually.

The country became a net coffee imported in 1997 and is buying mostly from Vietnam and Indonesia.

To revive the industry, the Department of Agriculture (DA) and the NCDB launched a Coffee Rehabilitation and Fertilization Program and designated the coffee-growing Cavite, as the lead province for the campaign that is being pitched in 22 provinces.

The NCDB is still hoping it could get the P2.6 billion fund required to implement the 10-year coffee development program. Coffee was identified by the DA as one of high value commercial crops that will be given priority under its program to develop two million hectares of new agribusiness lands.

"Under the coffee roadmap, we hope to be able to meet the local demand and even go into exports of special coffee varieties," said Matti.

The program encourages inter-cropping of coffee with high-value commercial fruits and vegetables.

Under the NCDB program, about P150 million will be needed yearly to sustain efforts to increase coffee production. These activities include setting up clonal gardens that would propagate high-quality coffee planting materials nationwide; establishing coffee processing plants to create value-added to the commodity; establishing a seed purchase fund; rehabilitation of coffee farms and fertilization of coffee plantations.

NCDB is projecting that in 10 years, the country will be able to achieve an annual coffee production of about 75,000 metric tons (MT) which is sufficient to meet the projected demand in 2015.

The NCDB is eyeing a production target of one million 60-kilo bags of coffee beans by 2015. Matti said planting 30,000 hectares with coffee trees and achieving a minimum productivity of one ton per hectare would accomplish this.

Yap said the DA has already asked NCDB to submit a more detailed blueprint so that its efforts will be better synchronized with the department’s production strategies.

"The DA is in full support of the efforts to perk up the industry. We are willing to finance farmers as long as we can leverage their forward contracts from coffee blending manufacturers. What we want to do is to get them to increase their production and to link them with the markets," said Yap.

Yap also encouraged farmers to find niche markets and not only look into expanding Robusta coffee production which has a more bitter taste compared to Arabica and which is often used in instant coffee.

"Instead of trying to play catch up with Vietnam which mostly produces Robusta, our farmers should go for specialty varieties that could fetch premium prices," Yap said.

Despite goods prospects, coffee farmers still face numerous problems, among them is rising production costs and lack of access to credit, said Albert Ambagan Jr., municipal mayor of Amadeo.

"Coffee prices may be good, but production inputs are increasing, especially fertilizers which have doubled in prices in the last two years. What happens is that farmers scrimp on fertilizer application and as a result, yields are lower. And because many are marginalized planters, they do not have enough access to loans," said Ambagan.

Ambagan’s municipality which is the top coffee producing area in Cavite in terms of hectarage, launched in 2003, the Adopt-a-Farm Project, an innovative concept that aims to convert underutilized and idle lands to productive coffee farms. The project is one of the components of the 10-year roadmap for the coffee sector intended to provide extra income and generate jobs in the farmside.

So far, about 50 hectares out of Amadeo’s 2,300 hectares of traditional coffee farms have been adopted. Its sponsors now include Pacita U. Juan, president and chief executive officer of Figaro coffee chains who also co-chairs the NCDB.

Fluctuating coffee prices is also a major concern for coffee farmers.

"Many times, farmers encouraged by good market prices, plant more and then are unable to recover their costs or are forced to sell at a loss because prices have gone down," added Ambagan.

Still, these problems could be threshed out and new measures established to keep prices more stable, said Matti.