Honduras presents as an exception in Central American coffee production, being the only country to increase volume, and at a rapid rate. Steadily holding its place within the top ten producing countries of arabica coffee, Honduras went from the fifth largest producer of arabica in the world, to the third in 2018, overtaking Ethiopia.
Yet Honduran coffees are not well known or established in the market. Coffee professionals are far more likely to know the regions and flavour profiles of Colombia and Ethiopia than they are to even be aware of the recognised regions within Honduras for distinctive and exceptional coffee qualities.
Coffee producers in Honduras have long suffered the repercussions of global market trends, leaf rust, and the limitations being a small scale farmer places on your profitability. Of the 105,171 coffee producers registered with the Instituto Hondureno del Cafe (IHCAFE), 104,416 are small to medium sized producers and together they produce 86% of the country’s production. Having traveled to Honduras repeatedly to source coffee, meeting producers, seeing both the qualities of their coffees and the care taken in their production, I know that they remain very vulnerable. What limits profitability in Honduras?
High cost of production
Honduras has had some ambitious goals over that last years when it comes to production and has in place a number of institutions for the progression of the coffee sector which offer support to the sector, but have had difficulty in affecting profitability on an individual level.
Honduras is also a country with a high and increasing cost of production. One reason for this is the constant struggle against leaf rust.
Coffee Leaf Rust in Honduras
Leaf rust is an airborne fungal disease that can devastate entire coffee producing regions. When a plant is infected by leaf rust it is unable to produce cherry, and it spreads easily from tree to tree. To stop the disease from spreading farmers must treat all trees with fungicides, not just those infected. Sometimes, with very careful management, the outbreak is contained and a farm remains productive, however the yield of those trees is often severely affected. When yield is down, the cost of production goes up, as fixed costs are spread over fewer cherries.
IHCAFE has worked considerably to develop new varieties with leaf rust resistance. Implementing these on an existing farm is an expensive endeavour, as old trees must be removed and new trees take several years to become productive. In that time, leaf rust evolves. A variety developed by IHCAFE specifically for its resistance to leaf rust, known as Lempira, was found affected by leaf rust in 2017.
Taxes and fees
In the past farmers carried the financial burden of loans the Government gave during a four year period (2000-2004) of low prices. These loans have 20 year repayment terms, and although they have now been paid off, this led to the creation of a fund that farmers are obliged to contribute to.
After the coffee price crisis of the early 2000’s, a trust known as a fideicomiso was created to help farmers avoid foreclosure on their farms by banks. The trust initially enforced deductions to pay back existing loans from this previous period of support from the government. These deductions are still in place, 10.5 c/lb of exported coffee is placed within the trust and is then available for the producer to take a loan against if needed. If this service is not used, these payments will be returned to the producer in September. There is no interest paid to the producer for this period that their money is tied up within the trust. This trust is managed by IHCAFE, and the interest earned is used to pay for things within this organisation.
There is also an export tax of 2.75 c/lb. This money goes to IHCAFE, and one of the four organisations that a producer is obliged to join, AHPROCAFE, ANACAFEH, CCCH, and UNIOCOOP. There is no legislation in Honduras for a minimum price that must be paid to a farmer for coffee, although the price paid will need to be registered upon export. We have seen in some cases these organisations provide massive support to producers, but they themselves are also under pressure to focus on increased productivity and not quality.
Difficulties maintaining micro-lot traceability
The majority of farmers in Honduras have small to medium sized farms. They produce to parchment stage, yet are unable to dry mill, sort and grade their coffee for export. There is also a real lack of service providers for smaller scale production which forces farmers to sell their coffee in a way that does not allow any differentiation, as a generic regional product.
Finding solutions in Intibuca
We have recently partnered with a group of farmers in a region called Intibuca. It is one of the 18 departments (states) in Honduras and is a well known area for coffee production. Within Intibuca we have chosen to focus on the municipality of Masaguara, and in particular on a group of 60 producers in the community of Pozo Negro. These producers have organised themselves into a group who come together to learn and share knowledge. They elect a chairman every year who, for several years running, has been Wilmer Alexis Grau Montoya. As I meet with this group and hear from the producers themselves, their shared respect for Wilmer is clear.
This group of producers is making an enormous effort, and reinvesting in their infrastructure on their wet mills, drying facilities and back into their production. This is an exciting development, as it allows for greater traceability and separation of high quality micro-lots, and is by no means ordinary for Honduran coffee producers.
Working with our producing partners in Intibuca allows us to keep separate the individual production of each farmer and give them a chance to create a name for themselves and their coffees. Our aim is to find a market for these great coffees which will lead to greater profitability, and a chance to reinvest in production, and hence grow.
The coffees we are buying from this community in Pozo Negro have well defined fruit notes with a softer acidity, making them very accessible to a wide range of coffee drinkers. And remarkably for such a small geographic area, different lots can display very distinctive characteristics, proving the value of small scale post harvest processing to maintain micro-lot separation.
It is key in an environment like this to work alongside producers and facilitate their ability to produce the kinds of coffees we want to buy and be able to drink. This is our long term goal with the producers in Intibuca, and we hope you will partner with us, and them, in this endeavour.