Market Report: Nicaraguan Coffee Market
Nicaraguan Coffee Production Faces Challenges Amidst Climate Shocks, Labor Migration, and Political Turmoil
In the world of coffee production, Nicaragua has long been renowned for its high-quality arabica beans, commanding premium prices and attracting the attention of coffee lovers worldwide. However, a recent report from the USDA Foreign Agriculture Service (FAS) sheds light on the significant challenges that the Nicaraguan coffee industry currently faces.
According to the report, coffee production in Nicaragua is expected to remain relatively flat in the market year 2023/24 compared to the previous year. One contributing factor to this stagnation is the sub-optimal application of fertilizers in recent years, resulting in decreased yields. The estimate of 2.46 million 60-kilo bags of Nicaraguan arabica production could fluctuate depending on the impact of El Niño conditions in the latter half of 2023.
A more pressing concern for the coffee industry in Nicaragua is climate change. The report states that extreme weather events are becoming more frequent and severe, posing a growing threat to coffee cultivation. This includes erratic rainfall patterns, prolonged droughts, and increased vulnerability to pests and diseases. The industry must grapple with these climate shocks, which could further hamper production and quality.
Another significant challenge is the migration of laborers. Nicaragua has experienced a surge in outbound migration, with an estimated 200,000 Nicaraguans (approximately 4% of the population) leaving the country in 2022. The ongoing deterioration of political conditions within Nicaragua has compelled individuals to seek better opportunities elsewhere. This labor shortage is a pressing concern for coffee producers, as it could impact the timely and efficient harvesting of coffee cherries, potentially affecting the quantity and quality of the harvest in the upcoming year.
Despite these obstacles, Nicaraguan coffee continues to command premium prices on the global market. In market year 2022/23, Nicaraguan coffee fetched price premiums of $30 to $50 per 60-kilo bag above global commodity prices. Exporters believe that sustained prices above $180 per bag in 2023 could enable improved farm management, including increased fertilizer application, and drive production back above 2.7 million 60-kilo bags in market year 2024/25.
The United States remains the largest export market for Nicaraguan coffee, accounting for 45% of the volume, followed by Europe at 22%. The high-quality arabica beans from Nicaragua are particularly sought after by specialty coffee roasters and cafes. Notable importers in the United States include Starbucks, Peet's Coffee, and Dunkin' Donuts.
However, amidst the challenges faced by the Nicaraguan coffee industry, political turmoil casts a shadow over its future. The report highlights the cancellation of the legal status of the Private Sector Superior Council (COSEP) and other industry associations by the Nicaraguan government. This move hampers the ability of coffee exporters to collaborate, advocate for the sector, and develop a comprehensive national coffee development strategy. The loss of the Nicaraguan Association of Coffee Exporters (EXCAN) is viewed as a setback, as it diminishes an institutional pillar that once supported an industry with significant growth potential.
In conclusion, the Nicaraguan coffee industry stands at a critical juncture, grappling with the effects of climate change, labor migration, and political instability. While the industry's reputation for high-quality coffee and its strong export markets provide some optimism, concerted efforts are needed to overcome these challenges. It is crucial for stakeholders to address climate resilience, find solutions to labor shortages, and establish a supportive institutional framework that fosters sustainable growth. Only through such measures can Nicaragua's coffee industry navigate these troubled waters and secure a thriving future.