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Ecuador copes with coffee's free market.

Ecuador copes with coffee's free market

Due to the low prices to producers, the coffee crop in Ecuador is estimated at 1.2 million (60 kg.) bags, down from 1.7M last year. The yield is expected to be approximately 500 kilos per hectare. The quality will be average, which is something of a testimony to the producers because they are not making any money.

The 50,000 producers are mostly smallholders who farm 10 hectares or less, and are widespread throughout the country. The crop consists of 30% Washed Arabica, 40% Natural Arabica and 30% Robusta. The Arabica is grown from 500 to 1000 meters on the western slope of the Andes, while Robusta is grown from 200 to 500 meters on both slopes. Both types are grown the length of the country.

There are many reasons why the yield in Ecuador is so low; some historical and some short term. The historical reason why there are so many producers with low productivity is that there was an agrarian reform about 20 years ago. Aside from the breakup of efficient farms into smallholdings, property rights are still now widely respected, with the resulting theft of coffee, and a resulting lack of investment. The current low prices have a concurrent effect, which is to depress the yield, and even to encourage some farmers to switch to alternative crops. The positive side of the land reform is that there are 50,000 coffee farmers in Ecuador and not 50,000 terrorists.

Another reason that coffee yields are especially low in Ecuador, which is similar, climatically, and in soil condition, to Colombia, is that there is no system in place to get potentially beneficial information to the farmer. An example is the effect the pest `broca' is having in the two countries. Through the Federation, Colombian farmers were told of, and are implementing a program to use bees to combat the broca insect. The bees in question come from Ecuador, but the Ecuadorean farmers have not been told about this new approach. Aside from price (and therefore competing crops), and the lack of inputs, broca is the major cause of preventable crop loss, and of farmers getting out of coffee, with a resulting decrease in yield, and even of production.

The government organization that is vaguely involved with coffee is not active right now that there are no quotas to distribute or reason to set up `coops' to export. However, the exporter's association, Anecafe, is trying to do something. It has approached an inter-Andean development Bank, CAF, for a $50 million loan to be used to provide liquidity to rural banks, who will make commercial loans to farmers who want to improve their productivity. The bylaws of the Agency in question, CAF, require funding to go through a government organization, so even though the money is available, the farmers will have to wait for bureaucracy to move. In addition to loans to the farmers, Anecafe would like to establish model farms to provide agronomical information and seedlings to farmers, but the problem is lack of money.

The trade in Ecuador is holding its own economically, as the shakeout has already happened. There are roughly 15 active exporters, and five large ones; whereas during quota years there were 90 registerd exporters. Many of those were government sponsored coops who sold their quota to viable exporters. Those coops have disappeared with the advent of a free market.

The shipment of coffee from Ecuador has frequently been plagued by theft. There are various solutions being proposed, both by roasters and by the exporters themselves. Until a solution, or consensus, is found, various approaches are likely to be tried. Perhaps a more troubling development concerning coffee shipments from Ecuador is the sometimes nonavailability of shipping space. The reason is that the Chilean economy is booming, or getting back to pre-Allende levels, and many vessels are full before they reach Ecuador. There have been cases of confirmed bookings from Guayaquil to Europe being ignored. That is especially troubling if the service is monthly and if the roaster is working on tight inventories. Fortunately, some shipping lines arrange trans-shipments at no cost.

Fred Lockwood Associate Publisher
COPYRIGHT 1990 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Author:Lockwood, Fred
Publication:Tea & Coffee Trade Journal
Date:Sep 1, 1990
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