May 19, 2009 / 1:52 PM / 11 years ago

Panama sees less specialty coffee crop, high prices

BOQUETE, Panama, May 19 (Reuters) - Panama’s specialty coffee growers say they harvested fewer high-priced beans this year and struggled to meet contracts with buyers because of bad weather and problems with labor and investments.

Panama produces a tiny amount of coffee compared to its Central American neighbors — about 190,000 60-kg bags a year — but it has a dedicated clientele of specialty buyers who pay top dollar for its gourmet crop, like the prized geisha beans.

Poor flowering and heavy rain and wind during the harvest season, which is coming to a close this month, halved the output of some of the Panama’s best known producers, including Hacienda La Esmeralda, which set an online auction record in 2007 when it sold its coffee for $130 per pound.

“It was a rough year,” said Daniel Peterson, of the family-owned farm high in the forested mountains of western Panama’s Boquete region. Peterson said La Esmeralda produced 150 60-kg bags this year compared with 300 bags last year.

A labor shortage in Panama has pushed up costs for farmers as workers found better-paying jobs in the construction industry or across the border on coffee farms in Costa Rica. Growers with tight budgets invested less in maintenance.

Government estimates show the size of Panama’s small coffee crop will stay flat or decrease slightly in the 2008/09 cycle.

But Ricardo Koyner, the president of the Specialty Coffee Association of Panama, estimates output among the members is down 30 percent.

One sign production is off was a drop in the number of farmers at Panama’s annual coffee cupping this month, where international buyers rate quality in blind testing.

Only 33 coffees were entered into the contest this year compared with 54 in 2008, said Francisco Serracin, owner of Don Pachi Estate coffee farm, also in Boquete.

Small lots of the top-rated beans go to an online auction in late May.

“Many producers have had to see what they can do to meet their commitments with their buyers,” said Serracin.

TIGHT SUPPLY ACROSS THE REGION

Panama’s tight supplies mirror the situation in larger Latin American coffee-producing nations like Colombia and Guatemala where high-end coffees are commanding record prices.

The International Coffee Organization, or ICO, said a shortfall of around 2.5 million bags of Colombian milds pushed prices up in April to their highest monthly average since February 1998.

Prices also rose as weather problems and high labor and fertilizer costs limited the replacement export ability of Central America, the ICO said in a report.

Coffee buyers and analysts said demand for Panama’s gourmet, expensive beans will remain strong despite the economic downturn since most consumers who seek out the country’s crop are connoisseurs like followers of fine wine.

“Once you drive an expensive car and appreciate the fine differences, it’s hard to go back to an old clunker. And it’s the same thing in terms of coffee,” Judy Ganes, a New York-based coffee consultant, said.

Panama has found a niche with these high-end buyers who are still willing to shell out cash for the best lots, but larger coffee chains like Starbucks (SBUX.O) are trying to lower prices and cut costs.

“We’re probably less inclined to go out on a limb for a really expensive coffee right now,” said Doug Welsh, a vice president of Peet’s Coffee & Tea PEET.O, a California-based specialty coffee buyer and smaller rival of Starbucks. (Editing by Jim Marshall)

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