From the Field
Monday, October 9, 2023
What Are Peruvian Producers Thinking About?
While production volumes are higher in Peru this year, there’s a lot on producers’ minds as the harvest winds down. From low demand to higher new Fair Trade minimum prices, Peruvian producers have a lot on their plate. To get a sense of their concerns and to survey the quality of the crop, Felice Chay, Latin America Origination Coordinator, recently went to Peru and spoke with over 20 of our producing partners.
In terms of volume, production this year has been great, Felice says. We expect the 2022/2023 crop to be around 4.2 million bags. The challenge this year for groups is that demand has been really slow and many groups still have volume left to sell.
On top of that, Fairtrade-certified (FT) cooperatives are facing additional concerns about selling their FT coffees at the new, higher FLO minimum price. While the FT minimum change is happening globally (with the exclusion of Fairtrade USA), Peru will likely be one of the most hard-hit by the changes. “Peruvian cooperatives are more dependent on Fairtrade sales than Central American or other regions,” Felice says. “They have historically sold the majority of their production as FT and the loss of those premiums could be significant.” Worry about demand for Fair Trade coffees was high, Felice says. “They’re concerned: is the new FT minimum price going to affect demand? ” As a result, some cooperatives are recertifying as Rainforest Alliance (RFA), a certification they’d previously stopped due to the additional requirements and higher costs around the new criteria in 2022. “I think it’s likely that most cooperatives will find other certifications under which to sell most of their coffees.”
There have also been reports of coffee leaf rust on low and mid-altitude farms. It will be important for producers to do proper farm maintenance so that it doesn’t negatively affect next year’s crop.
In the face of all these uncertainties, building strong partnerships with producers and cooperatives is paramount. “We have built a really strong network of suppliers and even with the existing challenges, I believe we’ll continue to source high-quality and certified coffees from our origin partners,” Felice says. One of the building blocks to a strong network is working closely with our partners to help them access financing. While Sucafina does not directly provide loans to partners in Peru, we work closely with Root Capital and other social lenders to make introductions and provide commercial references for our partners.
The harvest is nearly done in the low- and mid-altitude regions and is past the peak in the high-altitude regions. Plenty of coffee remains in country ready for booking. With high reserves and reasonable prices, now is the time to contract this year’s Peruvian coffees. Get in touch with your trader today for samples.