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Guatemala Sees Coffee Output Flat as Costs Rise

Source: Reuters
26/03/2008

Guatemala City, March 25 - Guatemalan coffee farmers will have a hard time boosting output this year as rising fertilizer prices and higher shipping costs make it difficult to renovate old farms, a top coffee official said on Tuesday.

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Christian Rasch, the president of Anacafe, had projected the Central American country could increase its crop by as much as 6 percent each year, but he said those plans will be stifled by rising oil prices.

"Everything is going up, fertilizers, fuels, herbicides ... costs of inland freights, security, insurance," Rasch told Reuters in an interview.

Anacafe, the country's growers' group, now estimates it will export 3.75 million 60-kg bags in the 2007/08 season, the same as in the previous season.

Many large coffee farmers use oil-based fertilizers that are more expensive as oil tops $100 a barrel. Higher costs make it difficult for producers to take advantage of soaring coffee prices, he said.

Arabica coffee futures have recently hit 10-year highs, causing major U.S. roasters like Folgers , Maxwell House and Chock Full o'Nuts to raise their list prices.

"Volatility is not good for producers and its not good for roasters ... they have been burned by this volatility in the past," said Rasch.

Guatemala took a long time to recover from a coffee crisis at the beginning of the decade, when international prices dropped to record lows and pushed many out of business.

Anacafe's long-term strategy is to move away from the volatile Arabica 'C' contract in New York by securing fixed contracts for its high-quality beans.

The country's sells 25 percent of its crop to coffee giant Starbucks on long-term deals, said Rasch, and is promoting new specialty coffee markets in Australia, Asia and Russia.

He said these new markets could help stave off any effect that a prolonged economic slowdown could have on consumption of expensive coffee drinks in the United States.



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