Report Highlights:
Recent increases in international coffee prices are providing some relief to El Salvador's depressed coffee sector. El Salvador's coffee production continues to decline and in MY 2004/05 is expected to reach a historically low 1.25 million 60 Kg. bags green bean equivalent (GBE). Efforts to promote Specialty coffee continue increasing exports for higher quality coffee. Activities such as the Cup of Excellence and Q auctions are assisting El Salvador's coffee promotion abroad. In addition, El Salvador had a stand at the 2005 Specialty Coffee Expo where various coffee brands had exposure to quality coffee buyers.
Foreign exchange income from coffee exports is expected to increase in 2005/06 reaching approximately $150 million.
Executive Summary
El Salvador’s 2004/2005 coffee harvest is expected to be approximately 2 percent lower than previously reported.New data provided by the Salvadoran Coffee Council (CSC) reveals that the 2004/05 harvest is expected to reach 1.26 million bags.The continued negative impact from low international prices is the main cause for the extended production down slide.Favorable conditions are expected to positively impact production for the 2005/06 harvest.The recent increase in coffee prices is expected to strengthen financially the coffee sector and assist in dealing with carryover debt and input investment.
Coffee exports in 2004/05 are expected to reach 1.24 million bags.Expected higher production in 2005/06 will increase export numbers.Local financial institutions continue to require farmers to have a planned coffee-sales program in order to have access to loans.This requirement is forcing farmers to forward contract their coffee and avoid speculation.The U.S. is the main export destination for Salvadoran coffee accounting for 33.5 percent of MY 2004/05 exports through April 2005.In MY 2006, exports to the U.S. are expected to reach 456,400 sixty kg. bags.Other important markets continue to be Germany, England, Belgium, France, Sweden, Canada and Japan.
The closing of a Nestle processing plant in 2003 caused domestic consumption to shift from mostly ground coffee to mostly soluble coffee.This has led to a sharp increase in soluble imports mainly from Brazil and Nicaragua.
The CSC continues to monitor exports through the use of export registrations permits.The GOES has guaranteed through the Multi-Sectoral Investment Bank (BMI) a loan of $ 32.00 per hundredweight (cwt) to cover routine maintenance and harvesting during the 2005/06 crop.Coffee is still the most important source of employment in rural areas, with the coffee harvest alone providing approximately 130,000 jobs.Coffee is no longer the major source of export revenues in El Salvador.In 2004, coffee only accounted for approximately 4 percent of total export earnings.The maquila industry (cut and sew operations) is the major source of export revenues.Family remittances from Salvadorans residing in the U.S. in the order of $2.4 billion in 2004 are also helping the country’s economy remain afloat.Coffee exports in 2005/06 are expected to generate approximately $150 million in foreign exchange.
Even though the GOES has not dictated a national policy to promote Salvadoran coffee, some efforts are being focused mainly on Specialty and Gourmet qualities (See Trade).The new GOES administration that took office on June 2004 has invested resources to assist the agricultural sector including the nomination of a Presidential Commissioner for the coffee sector.