Caribbean & Central America - January 2023

Coffee farming continues to play a “dominant role in the economy and social fabric” of El Salvador, Guatemala, and Honduras, but the industry is facing serious challenges, according to a new report from the Inter-American Development Bank (IADB).

Providing up to 5% of GDP and involving around 250,000 families, the coffee industry is massively important in the Northern Triangle, says the report, which was published 13 December. Most coffee farmers are small producers who rely on the crop to make a living, but they are facing serious challenges in the shape of low productivity, lack of available workers, low profitability, and a lack of inclusion for women and young people. Both the coronavirus (Covid-19) pandemic and climate change are making these challenges harder to overcome, according to the report.

As part of their research, which was produced in partnership with the Fundación Hanns R Neumann Stiftung (HRNS), a Germany-based NGO that works with coffee farmers, the authors spoke to 1,044 coffee growing families and interviewed representatives from national and subnational coffee organisations. 

The findings show that two-thirds of Honduran coffee-growing families rely on the crop as their main form of income, compared to 40% in Guatemala and one-third in El Salvador. Other income is generated by selling labour, remittances, and small businesses, according to the report. It is also striking how many of these families are small producers, particularly in Guatemala (80%) and El Salvador (82%), compared to 64% in Honduras. The productive area of these small farms is largest in Honduras with 2.6 manzanas (a common unit of measurement in Central America (with one manzana = 1.68 acres) followed by 2.2 manzanas in El Salvador and 1.6 manzanas in Guatemala.

Low productivity is a consistent problem, with El Salvador recording just six quintales (100lb bags) of dry parchment coffee, or fruit that has been dried but not shelled, per manzana during the 2020-2021 harvest, compared to 9.7 quintales in Guatemala and 1,800 quintales in Honduras. Prices also varied between countries, with survey respondents reporting an average of US$109 per quintal of dry parchment coffee in Guatemala, compared to US$86 in Honduras and US$77 in El Salvador. For the 2020-2021 harvest, this meant average net annual income for small farmers of US$450 in Guatemala, US$1,027 in El Salvador, and US$1,653 in Honduras, due to wide variations in different variables in each country.

These conditions mean that many coffee farmers have emigrated in search of better economy opportunities. In Honduras, 20% of coffee growing families have seen at least one member emigrate, compared to 12% in Guatemala and 6% in El Salvador. Increasing food insecurity due to climate change and the Covid-19 pandemic have intensified the issues faced by small producers, who were also badly affected by storms Eta and Iota in November 2020.

In order to better deal with the issues facing the industry, the report underlines that access to credit is crucial. Unfortunately, small farmers do not enjoy the same access as larger producers. Just 11% of small farmers can borrow money in El Salvador, compared to 15% in Guatemala and 28% in Honduras, whereas 42% of large producers can in Guatemala, 67% in Honduras, and 100% in El Salvador. The main sources of financing are banks, followed by organisations of coffee producers.

Pressing issues

Many of the issues faced by coffee farmers look set to worsen in coming years, with the impact of climate change set to increase. Changing weather patterns mean more frequent and intense droughts, which cause coffee plants to produce less fruit and suffer from flower bud abortion and more pests. Periods of excess rainfall also affect production, knocking fruit from the plant and eroding the soil on farms, as well as increasing the prevalence of illness, according to the report.