Coffee traders in limbo
Published:Sunday | June 7, 2020 | 12:25 AMKarena Bennett - Business Reporter
Efforts to cobble a deal with a local buyer for about 600,000 pounds of coffee, a build-up of beans for which members of the Jamaica Coffee Exporters Association, JCEA, otherwise has no takers, have made little progress.
Now with a fresh crop of coffee slated to hit the market in August, JCEA has put an additional proposal on the table. The association is looking to the export market, where it hopes to offload at least 10 per cent on its inventory of beans under a ‘sale by sample’.
The proposal was among points for discussion that JCEA president Norman Grant had with the Jamaica Agricultural Commodities Regulatory Authority, JACRA, on Thursday.
A sale by sample, according to Grant, can be facilitated based on revised regulations but would still need a nod from the regulator.
Grant, however, did not disclose whether a purchaser had been identified.
“We are in dialogue with JACRA about it, but it is at a sensitive stage…,” he said.
The phased reopening of the economy on June 1 and plans to reopen the borders to international guests on June 15 have lightened the mood for the coffee processors, for whom the hotel sector has been a lucrative market.
Still, they fear that a “real turnaround” of the tourism industry might not happen fast enough to quell thoughts of permanent closure for some coffee processors and lowering order quantity from farmers amongst those who will survive the pandemic.
According to projections from the JCEA, if the processors are unable to sell the inventory by July, it could result in the sale of only 60 per cent of the 2020-21 crop and would lead to price declines from an average of $5,000 per box to as low as $3,000 per box.
The 2020-21 crop yield is projected to increase by 15 per cent over the previous crop at 220,000 boxes of Jamaica Blue Mountain and 25,000 boxes of High Mountain coffee.
“We have asked JACRA not to issue any new import permit for coffee until we would have been able to dispose of a substantial portion of this coffee on the local market,” Grant said.
JCEA has been in and out of meetings with JACRA since last month after social-distancing requirements to minimise the spread of COVID-19 forced the closure of hotels and restaurants across Jamaica, ultimately leaving the processors with inventory of 600,000 pounds of roasted coffee beans.
JACRA, according to Grant, served as facilitator between JCEA and a local coffee producer to which JCEA had hoped to sell the inventory at a reduced price of US$3 per pound. While Grant has never named the prospective buyer, well-placed sources have said it was Salada, the sole processor of instant coffee. JCEA had hoped the buyer would have taken some of the inventory off its hands. However, sources indicated that among other issues hobbling the deal, there was a difference over the price for the beans.
Prior to the pandemic, green beans on the local market retailed for US$8 per pound. Sale to the local producer at US$3 per pound would mean losses of US$5 per pound for JCEA members, and as such, they were seeking the Government’s assistance in cushioning the blow to coffee processors.
In letters to Minister of Finance Nigel Clarke and Agriculture Minister Audley Shaw last month, the JCEA requested $170 million in subsidy from the Government as part of the COVID-19 intervention to the industry, funds it proposed should be transferred to JACRA to top up the income of processors on the sale of the 600,000 pounds of coffee to the local producer.
Honouring of the request would still see the processors absorbing a loss of $250 million, but it would allow them to better prepare for the 2020-21 crop yield, JCEA argued.
The coffee exporters are yet to hear back from the Government.
“We are still waiting on a formal response from the Government as it relates to the intervention, so we are sending a follow-up letter to the agriculture minister, and we are scheduling a virtual meeting for next week,” Grant said.