Sabalito, Costa Rica, Nov. 18 - Harvesting is peaking on some coffee farms in Costa Rica, but after prices took a steep dive in October some growers are waiting to sell and postponing new investments on hopes prices will recover.
At the CoopeSabalito coffee cooperative, the economic lifeblood of the mountain town of Sabalito near the border with Panama, farmers are worried they will not be able to cover costs with prices at current levels.
Coffee prices fell last month to their lowest levels in more than a year as investors, spooked by the global financial crisis, pulled money out of commodities futures.
"If the market stays like this we will survive but it puts us in a difficult situation," Walter Quesada, a manager at the cooperative, told Reuters. "We will put coffee in silos and ask God to do something."
When prices were higher two or three months ago, CoopeSabalito promised 7,700 60-kg bags of green coffee for December delivery with a price to be set by Nov. 20 and offered farmers advanced payments based on those calculations.
But now that prices have gone down, the cooperative will be lucky to get $1.20 per lb, which is not enough to cover the costs of picking the cherries, processing and delivering them to port.
After meeting its December commitments, the cooperative will still have an estimated 18,000 bags of unsold coffee in its silos.
Starbucks Corp, the coop's main customer, is willing to buy the coffee, but the members are reluctant to sell at a loss.
RETHINKING NEW INVESTMENTS
The pinch being felt in Sabalito should echo throughout other coffee growing areas in Central America when their harvests begin in mid-December.
Companies in the region are taking a second look at planned investments, including refitting mills for energy and water efficiency.
The government is trying to step in and help. Costa Rica's cooperatives, who produce about half of the country's coffee, obtained a $40 million line of credit last month from state-owned banks, but CoopeSabalito was not included in the plan.
CoopeSabalito is still paying for a $650,000 investment in new equipment after it bought new Colombian-made pulpers and dryers made by Brazilian company Pinhalense, making it hard to access credit.
Pinhalense executive Carlos Brando said it is too early to see a drop in orders but he is worried about sales next year.
Not all growers are as nervous. High-end specialty producers say they will be cushioned from the price fall because of the premiums paid for their quality beans.
When coffee prices collapsed at the beginning of this decade due to a glut in global supply, many farmers abandoned their fields or migrated to the United States.
The plantations that survived are now used to the boom and bust cycles of the crop.
"It is always the same with coffee, it goes down and then it comes back up," said Irma Alvarado, an administrator at a high school in a town near Sabalito that runs an experimental coffee farm.
"We think there should be diversification but that does not mean we are quitting on coffee," she said.