MEXICO CITY, Sept 6 Mexico's agriculture ministry will spend up to 90 million pesos($6.80 million) on a coffee hedging program next season aimed at shielding farmers against a further drop in market prices, a senior official said on Friday.
The price of the most-traded arabica futures contract has fallen more than 60 percent since peaking above $3 per pound in 2011, just as production costs are shooting up in Mexico and across Central America due to the spread of a tree-killing fungus known as coffee leaf rust.
During the upcoming 2013/2014 harvesting season, which kicks off in October, participating farmers will be able to hedge their crops via futures contracts in which the government will pick up 85 percent of the farmers' hedging costs.
"This is about protecting farmers from any drop in prices," Belisario Dominguez, head of productivity and technological development for the agriculture ministry, told Reuters.
"We would hope that all or the majority (of coffee farmers) will participate," he added.
As many as 180,000 government-registered Mexican coffee farmers are eligible for the program, he added, so long as they buy the subsidized hedges for a minimum of 369 60-kg bags.
Even as Mexican and Central American coffee farmers brace for lower output during the 2013/2014 season and beyond due in large part to the fungal outbreak, arabica prices have edged down on growing supplies from major producers outside the region. ($1 = 13.2405 Mexican pesos) (Additional reporting by David Alire Garcia; Editing by David Gregorio)