Coffee farms earn so little that supply may soon drop: ICO chief

Jose Sette (C), executive director of the ICO (International Coffee Organization) speaks during the 120th Session of the International Coffee Council in Yamoussoukro, Ivory Coast September 25, 2017. REUTERS/Luc Gnago

YAMOUSSOUKRO (Reuters) - Farmers earn so little from coffee that many are likely to abandon their trees, endangering future supplies at a time of surging demand, the head of the International Coffee Organization (ICO) said on Monday.

Jose Sette, executive director of the intergovernmental body, said farmers’ low earnings in many countries were depressing supply even as demand grows around 2 percent annually on the back of rising consumption in emerging markets.

“If farmers are not well remunerated and encouraged to plant coffee, then at some point in the future we may have difficulties in getting the amount of coffee we need, because demand is growing steadily,” Sette told Reuters in an interview on the sidelines of ICO’s council meeting in Ivory Coast’s capital, Yamoussoukro.

“We don’t have the same confidence that we will have the supply to keep up,” Sette said, pointing out that coffee trees require a long term investment, “so farmers need to be convinced it’s worth their patience.”

Rabobank [RABOVR.UL] last month forecast a 2017-18 global coffee deficit of 6.1 million bags amid rising demand, and signs of tightening supplies are evident in top coffee grower Brazil, where inventories have dropped sharply.

“Oftentimes, especially in the consuming countries, there’s a great deal of emphasis on ... environmental sustainability ... but there is no corresponding emphasis on economic sustainability,” Sette said.

He urged governments to invest in research and support to farmers, saying they went too far in slashing agriculture spending during a wave of Western-backed structural adjustment programs in the 1990s.

Sette also identified climate change as one of the coffee industry’s most pressing challenges, particularly for mild-tasting arabica coffee, which is more sensitive to shifts in weather than robusta, widely used for instant coffees.

Top grower Brazil has been hit by a severe drought in some of its main coffee regions this year, leading analysts to cut early projections for a record harvest in 2018.

Editing by Tim Cocks and Mark Potter