USDA Attache: Nicaragua’s 2023-2024 Coffee Crop Forecast at 2.62 Million Bags

CoffeeNetwork (New York) – The latest USDA attache report notes that FAS/Managua projects MY 2023/24 total coffee production flat at 2.62 million 60-kg bags on positive flowering reports from key growing regions, favorable weather conditions, and increased fertilization. With the expectation of an El Niño weather system returning to the region in the second half of 2023, insufficient moisture in later fruit development stages could place an upper limit MY 2023/24 production. Particularly dry El Niño-related conditions in MY 2015/16 caused up to 25 percent losses in some areas of Nicaragua. Although market conditions have improved, with coffee prices above $180 per 60-kg bag (as of April 2023) and fertilizers prices falling from 2022 highs, industry contacts do not anticipate improvements in farm management practices in 2023 will substantially improve production in MY 2023/24. Industry sources project the benefits of improved fertilization in 2023 would promote higher production in MY 2024/25, as recommended coffee fertilization tends to produce a compounding positive effect in the second year, with sustained fertilization, through strong plant growth.

FAS/Managua estimates MY 2022/23 Arabica production fell 12 percent, while Robusta production remained constant. Farmers attributed the decline to a combination of historically poor coffee plantation management, characterized by insufficient replanting rates and inadequate access to higher-yielding, more disease-resistant varieties. Agricultural input prices rose up to 30 percent following a 2019 policy change that ended tax exemptions for a range of agricultural inputs. COVID-related supply chain disruptions drove shipping and fertilizer prices higher in 2020, compounding the effect of the tax policy change. Lower world coffee prices in 2022 undercut incentives to invest in coffee plantations, while a historical scarcity of reasonable credit terms for smaller agricultural producers, who regularly face annual interest rates of 40 percent, was exacerbated by the ongoing political crisis in Nicaragua that disincentivizes, particularly, longer term investments. However, it is an increasingly common practice for farmers to lock in prices on up to 20 percent of their production through forward contracts to reduce price volatility and facilitate more consistent business planning.

FAS/Managua projects MY 2023/24 area planted at 143,000 hectares and area harvested at 140,000 hectares, based on new information regarding expansion of Robusta production in the Caribbean Coast region. Political turmoil continues to weigh on the economy, drive outbound migration, limit available credit, and stifle investment in productive industries, particularly those with a longer horizon for recouping investments – coffee plantation expansion and renovation require at least three years before income is generated. FAS/Managua expects area harvested in MY 2023/24 to remain flat, though increased outbound migration could negatively affect labor availability during the MY 2023/24 coffee harvest.

FAS/Managua estimates the MY 2023/24 Arabica coffee crop yields to remain at 18 60-kg bags per hectare, consistent with MY 2022/23 and previous years. Although several coffee associations noted that little improvement has been made in improving Arabica yields, there are ongoing research efforts to increase productivity in Nicaragua. As part of the MOCCA project, WCR is leading actions to improve coffee breeding and agronomic research in collaboration with the Regional Cooperative Program for the Development and Modernization of the Coffee Sector (PROMECAFE) and the Nicaraguan Institute of Agricultural Technology (INTA). WCR is also engaged in evaluating and improving seed lots, certifying large coffee tree nurseries, and developing training materials for small nurseries in the country. Nicaragua hosts two WCR International Multilocation Variety trial sites. In collaboration with the coffee exporters MERCON and ECOM, there were another 18 on-farm trials in Nicaragua in 2022 testing improved varieties, including Marsellesa, H1, Centroamericano, Parainema, Obata and Starmaya, which are resistant to coffee rust.

Despite ongoing efforts, FAS/Managua projects limited average Arabica yield growth in the near-and mid-term, as access to financing – a function of international coffee price volatility, political and economic turmoil in Nicaragua, and an underdeveloped agricultural financial system – will continue to hinder investments in plantation renovation and in the adoption of good agricultural practices.

FAS/Managua estimates MY 2023/24 Robusta production flat at 160,000 60-kg. In 2021, the International Finance Corporation provided a $15 million loan to a regional coffee company to improve the productivity and quality of Robusta production in Central America. As that investment ‘crowds in’ production from farmers in the region, FAS/Managua expects annual growth of 5 – 10 percent over the next few years, with annual production topping 200,000 60-kg bags by 2030. At approximately $2,400 per hectare, annual costs of Robusta production are higher than traditional crops in the Caribbean Coast region, but Robusta profits per hectare – nearly $1,600 per hectare per year – are three-times greater than yucca, four-times higher than corn, and ten-times greater than cattle.

Industry sources estimate there are approximately 7,000 hectares of Robusta plantations (5 percent of total coffee planted area), with 4,000 hectares harvested in MY 2022/23. Far-sighted investors are planting Robusta area to support mechanized harvesting that will drastically reduce labor dependence and substantially increase per hectare profitability. Industry sources estimated Robusta yields as high as 70 60-kg bags per hectare in MY 2022/23, though most farms are expected to produce around 40 60-kg bags per hectare

Consumption FAS/Managua estimates MY 2023/24 per capita coffee consumption at about 1.5 kg, divided roughly evenly between soluble and roasted products. This is relatively low compared to other coffee producing countries in the region, such as Costa Rica and Guatemala. However, coffee is still an important part of the Nicaraguan culture, and many people consume it daily. One of the market trends in Nicaragua is the increased demand for high-quality coffee, particularly among younger consumers. Coffee shops where consumers can find a wide variety of coffee drinks, including cappuccinos, frappuccinos, cold brews, espressos, and lattes, are increasingly common in larger Nicaraguan cities. Though the local purchase of roasted coffee has grown over time, industry sources do not anticipate significant increases in consumption in MY 2023/24, as high levels of outbound migration, increased costs of basic food commodities, and continued economic headwinds work against expanded consumption.

Stocks Industry sources estimate coffee exporters typically hold year-end stocks of 120,000 - 140,000 60-kg bags, roughly equivalent to the volume of exports in the final quarter of the calendar year before new crop beans are available for export. There are years when stocks could be a bit higher or lower due to international market forces.

Trade FAS/Managua estimates Nicaragua’s coffee exports to reach 2.5 million 60-kg bags in MY 2023/2024. The United States was the largest market for Nicaraguan coffee in 2022, accounting for approximately 45 percent of all Nicaraguan coffee exports. The majority of Nicaraguan coffee exports to the United States are high-quality Arabica beans, which are in high demand among specialty coffee roasters and cafes. Some of the top importers of Nicaraguan coffee in the United States include Starbucks, Peet’s Coffee, and Dunkin’ Donuts. Europe is another significant market for Nicaraguan coffee, accounting for approximately 22 percent of all Nicaraguan coffee exports. European coffee buyers are particularly interested in organic and fair-trade coffees, which are in high demand among consumers