Fungus damage to Peru’s coffee crop lifts premium

Lima/New York | Reuters — The premium for coffee grown in Peru, one of the world’s top high-quality arabica growers, is nearing a three-year high after a tree-killing fungus ate into more of its crop than expected, delaying shipments, industry sources say.

Peru’s harvest kicked off in April at low-altitude plantations — the most vulnerable to the airborne fungus known as “roya” — and yields in those areas were dramatically lower, said Cesar Rivas, a producer and the former president of the major coffee association Junta Nacional del Cafe.

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“Those are the places hit hardest by roya,” said Rivas. “They produced such little coffee that now everyone is waiting for the higher altitudes to make their shipments.”

U.S. importers blame roya for tight local supplies, which they say have lifted differentials for Peru’s “hard bean machine cleaned” coffee to an average of 10 cents over the benchmark contract freight on board, from 7.5 cents less than three weeks ago (all figures US$).

“Exporters are having problems fulfilling their shipment obligations,” said Jorge Figueroa, a coffee specialist with the agriculture ministry. “July shipments are going to be delayed somewhat.”

If the differential rises above 10 cents, it will reach the highest level since June 2011.

Ructions in deliveries, however, may be temporary as farmers harvest crops grown above 1,000 metres, which are less affected by the disease. In addition, the problems come during a seasonally quiet time for the U.S. coffee industry.

Even so, signs of slower deliveries will underscore concerns about supplies after the region’s years-long leaf-rust infestation and a months-long drought parched crops in Brazil, the world’s No. 1 coffee grower, earlier in the year that almost doubled prices in just months.

Beans from Peru, the world’s eighth-biggest coffee producer, are typically sought at this time of year as roasters seek fresh supplies to tide them over until the next harvest from Central American rivals hits the market.

This year those supplies are already running low after the region’s worst-ever roya outbreak.

Coffee exports from Peru plunged 67 per cent in the second quarter year-over-year and were just 3,200 tonnes in June, about a fifth of June 2013, export association Adex data showed.

Forecasts on the impact of roya have varied wildly, increasing uncertainty in the market.

In May, Peru’s government forecast 2014 coffee output would rise by up to 15 per cent this year compared with last year’s roya-hit crop that reached 260,000 tonnes, a 20 per cent drop from the prior year. A local coffee association has said it expects production to fall by 15 per cent this year.

— Mitra Taj and Marcy Nicholson report for Reuters from Lima and New York respectively.

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