Ecuador’s coffee sector will raise production next season at the fastest rate in more than 50 years, as investment spurred by high prices pulls it out of a “drastic decline”.
The South American country will in 2022-23 produce 354,000 bags of coffee, “36% higher than the 2021-22 estimate”, the US Department of Agriculture’s Quito bureau said.
Output growth at that rate would be the quickest since 1970-71, on USDA data, and would follow what the bureau term a “drastic decline” in the industry, which in the mid-1990s, when its output peaked at 2.55m bags, ranked above the likes of Honduras and Peru in coffee production.
Ecuador produced 255,000 bags of coffee in 2020-21 – well below the 3.4m bags harvested in neighbouring Peru and the 6.5m bags in Honduras.
‘Lack of competitiveness’
While Ecuador offers strong potential for coffee – being according to the bureau “one of the few countries in the world where coffee production can take place nationwide”, even in the Galapagos islands – the sector has dwindled as farmers have shifted to other crops.
The area covered by the country’s coffee plantations has shrunk by more than 80%, to 60,000 hectares, since the early 1980s, encouraged by the likes of volatile bean prices, and dollarization of the Ecuadorian economy in 2000 which lifted output costs and undermined export competitiveness.
The sector remains disadvantaged by high costs of electricity, and of water which in the industrial centre of Guayaquil is 60% more expensive than in Colombia, and 85% above the price in Peru.
A higher minimum wage, of $425 per month, compared with neighbouring countries enhances “Ecuador’s lack of competitiveness” – especially given that the country’s crop, even of robusta beans, is largely hand-picked.
‘Lack of investment’
However, investment encouraged by higher prices, and government efforts to support the sector and the rural economy, is expected to boost yields in 2022-23.
“Production suffered for many years due to a lack of investment in rejuvenating plantations and new cultivars, but since 2020 coffee demand grew considerably worldwide and farmers have invested to improve their crops.”
The bureau said its outlook factored in assumptions of “better maintenance of planted area, recovery of old plantations, technical pruning and replacement of old trees and cultivars with new ones in recent years”.
It added that “prices for arabica increased to an average of $126.00 per 60kg bag. Specialty coffees can often receive nearly double that price at $220 per 60kg bag”.
The bureau also forecast a sharp recovery in Ecuador’s coffee consumption in 2022-23, of 34% to 328,000 bags, led by a resurgence in use of soluble coffee, imports of which were limited last season by global logistical disruption.
Exports will rise too next season, by 18.75 to a five-year high of 527,000 bags.