HONDURAS - SINTERCAFE · Introduction - Macros – coffee in Honduras • GDP: 19.5 billion USD Ag...

HONDURASPRODUCTIONGROWTHANDOUTLOOKPresentedbyChris.anLeSage,Email:cl@boncafehn.comBonCaféSA/ADECAFEHSINTERCAFENovember13,2015

Introduction-Macros–coffeeinHonduras

•  GDP:19.5billionUSDAgGDP2.5billionUSD•  CoffeeasaPercentageofAgGDP:26%•  PercapitaGDP:$2236USD•  Numberofproducers:100,000•  Coffeeexports:5millionbags60kg

Country Bagspercapita

Honduras 0.62

Brasil 0.27

Vietnam 0.30

Colombia 0.26

Indonesia 0.03

Hondurashasthehighestproduc8onpercapitaintheworld

HondurasExportVolume(15YEARS)

3.02.5

3.0 3.2 3.4 3.2 3.2

4.44.2

Millionsof6

0KGBAG

15YearGrowth:2.5mynbags6.3%growthrate5Yeargrowth:1.8mynbags9.3%growthrate

FarmSizeDistribution

25%30%5%

VOLUME PRODUCERS

25,000

•  1/3produc.oninhandsof70%producers,another1/3inhandsof25%and1/3Inhandsof5%.

•  95%percentofproducerspickcoffeewiththeirownfamily.

70,000

1000005million60kgbags

1.5million

1.8million

1.7million

AgeandGenderdistributionofProducers

18-309%

31-4028%

41-5027%

51-6020%

61+16%

•  AVERAGEAGEIS46•  HASGONEDOWNFROM56INLAST10YEARS

•  HONDURASHASEXECUTEDAGENERATIONALCHANGE•  13%FEMALE

male87%

female13%

Gender

Otherfarmissues

•  Limitedcredithaskeptproducersfromoutspendingearningbutalsolimitsinvestmentprojects.

•  Producerviewscoffeeproduc8onasaaninvestment.WhenhehassomecashleSoverheplants.

•  Producergetsnosubsidiesandcontributes$4.25/46kgtoIhcafe,$9/46kgtoareturnablecoffeefundandissubjecttoIncomeTaxabove$5000peryear.

•  Farmsproducesomeoftheirownfoodbutinaveryinefficientway.Transferingagriculturalprac.cesisverydifficult.

•  CandoAftude–genera.onalchange.

Anewgenerationofproducers

Humandevelopment

•  Producerlivesinverysmallcommuni.es.

•  Usuallynopurifiedwater,some.mesnoelectricity.

•  Nutri.onaboveaverageforproducerfamiliesbuts.llwellbelowcityandinterna.onalstandardsspeciallyinproteinconsump.on.

•  Schoolsarelimitedbeyond6thgradewithhighstudent/teacherra.os.

•  Accesstohealthcareisverylimited.

•  Limitedtransporta.on.

WHYDOESHONDURASKEEPGROWING?BUSINESSDRIVERS

HONDURASGROWTHANDOUTLOOK

Businessdrivers-Costofproduction2015

HIGHESTCOSTPRODUCER AVGSMALL LOWESTCOSTPRODUCER

FARMTOFOB

FARMGATE+

USD/46KG

•  Averagecostofproduc8onis$111FOB•  Highestcostproduceris$130butisonly5%ofproduc.on

Businessdrivers-costcomponents

•  $69per46kgoutofpocketcost.•  Familyfarmcostincludes$41aslivingexpenses.•  Convertsto$2665peryearperproducer.

$82FARMGATE

$41Labor

$18Other

INPUTS LABOR PICKING WETMILLING/DRYING ADMIN INTEREST LOGISTICS FARMTOFOB

$23INPUTS

$4LOGISTICS

$24FARMTOFOB

$111TOTAL

Businessdrivers-Costandsellingprice

•  Averagecompositesellingpriceis$150.00FOB

GraphofcostandSellPrice(10YEARS)USD/46KG

Businessdrivers-ProPitability

•  Theweightedaverageprofitabilityhasbeen$47per46kgforthelast10years.

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

AVERAGEPROFITS

Businessdrivers-ProPitability

•  Theweightedaverageprofitabilityhasbeen$47per46kgforthelast10years.

•  Thatcomesto$3300perproducerperyear

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

AVERAGEPROFITS

ProducerIncomeSummary

•  Overthepast10yearstheaverageproducerhasmade

•  $2665peryearinfarmlabor•  $3300peryearin“profits”•  $5965peryeartotalIncome

•  MinimumsalaryinHondurasis$4350peryear.

•  CostofbasicfoodinHondurasis$3000peryear

•  Theproduceriss.lllivinginpoverty

Businessdrivers-Price/growthcorrelations

94/95 95/96 96/97 97/98 98/9999/00 00/0101/02 02/0303/04 04/05 05/06 06/07 07/08 08/0909/10 10/1111/12 12/1313/14 14/15

Growth 1.2(15%) -0.5(-3%) 0.8(7%) 1.8(11%)

WAPrice 120 65 115 177

Businessdrivers-Price/growthcorrelationsAdjustmentforInPlation

95-99 00-04 05-09 10-14

Growth(bags)YearlyGrowth

1.2(15%)

-0.5(-3%)

0.8(7%)

1.8(11%)

WAPrice 120 65 115 177

WAPrice(AdjforInf2%)

170 83 133 186

Ininfla8onadjusteddollarsHondurashasshowngrowthabove$130

Businessdrivers-Productivity

2.53.0

3.02.4

3.0 3.2 3.4 3.2 3.2

4.4 4.2

5.010.0

11.011.8

12.913.7

13.112.6

16.5 16.5

60kg/HA

PRODUCTIONANDYIELD2000-2015

PRODUCCIÓN PRODUCTIVIDAD

•  Overthesameperiosyieldhaveincreasedfrom10bags/HAto18.8bags/HA

•  Accountsforbigpercentageofgrowth.

Businessdrivers-ReasonsforimprovedProductivity

•  MOREINPUTSPLUSBETTERFARMING

•  $250millionUSDinvestedoverthelast10years

•  ExporterandotherPrivatesectorimplementa.ons.•  Sustainabilityprogramspremiumsandone.mepayments•  Aidfromcoopera.ngorganisms•  Producerfundedasistance,IHCAFEandSuppliers

•  Genera.onalchangehasmadeproduceropentochange

Businessdrivers-plantedarea

•  Plantedareais274,000Hectares•  36,000HAlosttoRoya.

HA(´000)

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

WhydoesHonduraskeepgrowing?Businessdrivers

•  Farmsareinthehandsofverysmallholderswhopicktheirowncrop.

•  Overthepast15yearsonaverageproducerhasbeenabletomakealivingfromcoffeeproduc.on.

•  Alowcostofproduc.onhasallowedtheproducertosurvivecri.calcrisisyears.

•  Anewgenera.onofproducershasbroughtnewenergyintoproduc.on.

•  Anewgenera.onofproducershasbroughtenergyintoproduc.on.

•  Theproducerhasreinvestedsomeofhismoneyintohisfarmsasshownbyimprovedproduc.vi.es.

•  Anewgenera.onofproducershasbroughtenergyintoproduc.on.

•  Theproducerhasreinvestedsomeofhismoneyintohisfarmsasshownbyimprovedproduc.vi.es.

•  Theexporter,privatesectorandNGOimplementa.onshavecontributed

tothisdevelopment.

WHYWASTHEROYARECOVERYSOFAST?HONDURASGROWTHANDOUTLOOK

CurrenttrendvsNoRoyatheoreticalTrend

3.24.0

4.4 4.25.0

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

•  1.4mynbags60kg“lost”in2013-14vstrend=to25%ofprojectedvolume

•  18%permamentlossofproduc.oncapacityinpastcrop.

18%13%

NoRoyatheore.caltrendline15%growthrate.

NEWCROPNoRoy

aTheore.cal

TrendLine

DistributionofResistantversusnon–resistantvarieties100%Chart

•  29%nonresistantand13%overallloss.•  Currentlyalmost70%ofplantsareRoyaResistant

Pre-Roya Post-Roya

ThestoryoftheRoyarecovery….

•  Volumewasgrowingveryfast(15%)beforeRoya.•  Significantamountofnewplan.ngstriggeredbythemarket.

ThestoryoftheRoyarecovery….

•  Theperfectstormhits:•  Record2011-12croplerplants.red.

ThestoryoftheRoyarecovery…

•  Theperfectstormhits:•  Record2011-12croplerplants.red,•  Lowerpricescausedlowerinputsbyproducers

•  Theperfectstormhits:•  Record2011-12croplerplants.red,•  Lowerpricescausedlowerinputsbyproducers•  Hotandhumidweathercreatedperfectcondi.onsforRoyagrowth

•  Theperfectstormhits:•  Record2011-12croplerplants.red,•  Lowerpricescausedlowerinputsbyproducers•  Hotandhumidweathercreatedperfectcondi.onsforRoyagrowth•  LongtermcomplacencyonRoyapreven.onbyproducer

•  Royaresistantplantslimitlossto13%

•  Royaresistantplantslimitlossto13%•  Dispersionoffarms–somefarmsandareasnotaffected.

•  Royaresistantplantslimitlossto13%•  Dispersionoffarms–somefarmsandareasnotaffected.•  Mostfarmscon.nuedproducingtosomedegree.

•  Royaresistantplantslimitlossto13%•  Dispersionoffarms–somefarmsandareasnotaffected.•  Mostfarmscon.nuedproducingtosomedegree.•  Produceraftude•  MarketrallyFeb2014giveshopestoproducers•  Surprisingaftude-producersplantmorethantheylost.

HOWMUCHCANHONDURASGROW?ARESOURCEANALYSIS

Resourceanalysis-AgeofPlantationsin2015

1-2YRS

3-5YRS

6-9YRS

9-15YRS

16-25YRS

•  65%ofplanta.onsarelessthan9yearsold.•  Planta.onshavebeenrenewedandwillnot

presentaproblemforthenext10years

ResourceAnalysis-Land

•  Nomajorconflictswithpopula.oncenters•  Hondurasdoesnothavealandlimita.onfor

coffeeplan.ng.

AllofHonduras112,000km2

Landabove1000mSuitableforcoffee

55,000km2

Coffeeplanta8ons3,000km2

ResourceAnalysis-Rains(Acompositeof5regions)

1767 1827

Y2011 Y2012 Y2013 Y2014 Y2015

Mm/year

Rainshavebeenlowthisyear10months

•  Rainshavebeenlowerthanexpectedthisyearandwillimpactcrop.

•  Timingofrainsnotop.mal

Coffeelabordemand

0100200300400500600700

1 2 3 4 5 6 7 8 9 10

Pickersneeded

•  300,000pickerscurrentlyemployedofwhichsomeareproducersfamilies.

•  2millionpeopletheore.callyavailable.•  Produc.vityoffarmss.mulatespickers

Volume(millionbags60kg)

OtherLaborIssues

•  Popula8ongrowthrate2.5%popula.ongrowthrateadds200,000peopleperyear.

•  Distribu8on:50%urban50%rural

•  Salaries:Minimumsalaryis$4350peryear

•  Emmigra8on•  URBAN:Significantgrowthinurbancenters,SanPedroSulaand

Tegucigalpa,butpopula.onisdispersedinvariousotherurbancenters,Comayagua,LaCeiba,SantaRosaandCholoma.

•  FOREIGN:Hiringrestric.onsintheUShaveslowedemmigra.on.Around40,000peryearbutnotincreasingsignificantly.

•  Compe88on•  TEXTILES:Wasabigcompe.torinthe2000sbutnowgrowthhasslowed

significantly.242,000totalemployees.•  AGRICULTURAL:350000noncoffeefarmjobs.

Processingcapacityestimates

•  Hondurashasenoughprocessingcapacitytoreach6.5millionbags.•  Significantcapacityinvestmentsweremadearer2011-12cropwhichremainunused.

•  Thereisabotleneckinwetmillingwhichwillrequirealotofinvestmentand.me.

•  25milliondollarsincapacitywouldberequiredforeachaddi.onalmillionbags.

Threatstosustainedgrowth•  Climatechange:•  Produc.vitybeltwas500m-1200meleva.on20yearsago,•  Todayitis900-2000meters.

•  Deforesta.on•  Highamountofdeforesta.onusedforfarmingdecreasesbio

diversity,andincreaseserosionandotherbiologicalrisks.

•  Wateravailability:•  Rivers,rains,otheragriculturaluses.

ForestandWaterconserva8onseemslikeakeyelementforthelongtermfuture.

HowmuchcanHondurasgrow?

•  Doesnothaveresourceconstraintstocon.nuegrowing.

•  Capacityinvestmentswillberequiredforgrowthspeciallyinwetmilling.

•  Climateandwaterrepresentanimportantthreat.

•  Aproduc.onof8mllionbagsinthenext5yearsseemsfeasible.

WHATARETHECHALLENGESFORTHEFUTURE?HONDURASGROWTHANDOUTLOOK

Somethoughtsaboutthefuture•  Whereisyourcoffeegoingtocomefrom10yearsfromnow?

•  Astheworldwideconsump8ongrowsaremostcoffeesgoingtocomefromtwoorigins?Or

•  Shouldwesupportorigindiversity?

•  Astheworldwideconsump8ongrowsaremostcoffeesgoingtocomefromtwoorigins?orShouldwesupportorigindiversity?

•  Hondurancoffeeproduc8ongrowthhasbeenselfsustainingsoletussupport(notsubsidize)theproducer.

•  WeneedtofindawayfortheHonduranproducertoimprovehisincomeandcon8nuethisgrowthtrend.

•  Whatchallengesmustwemeet?

Challenges-Productivity

•  Improvingproduc8vityiskeytoremainingcompe88ve.

Quality-Pulpingstations

•  Eliminatepulpingsta8onsandqualitysepara8onkeytoqualityimprovement.

Quality-Wetmills

Challenges–Waterconservationandenvironment

WeneedtobringsustainableeconomicandhumandevelopmenttoHondurasthroughcoffeeproduc8on.

Producer-Productivity-quality-water-forrest

NEWCROPPROJECTION

NEWCROPPROJECTION(‘000s)60kgbags

2014-15 2015-16EXPORTABLE

+CARRY-IN 186 267

+PRODUCTION 5101 5700

=AVAILABLE 5287 5967

-SHIPMENTS 5020

=CARRYOUT 267

TOTALPRODUCTION

EXPORTABLE 5101 5700

LOCALCONSUMPTION 241 400

SMUGGLING 300 300

TOTAL 5642 6400

Commited 20%

Farmersold Below10%

Factorsaffectingcrop2014-15

•  Largeamountsofunpricedcoffeedeliveredtobeneficiostooksellingpressureofthemarket.

•  Producersoldwellbutintermediaryremainedlongandmany.meslost.

•  Qualitywasbeterthantwopreviouscrops.•  Yieldswerejustok.•  Smugglingwasanimportantfactorspeciallyattheendofthecrop.

•  Bigdemandforinferiorsfrommanypartsoftheworld.•  Venezuelabuyerscameinatkeypurchasing.mestopickupdemandslackinFeburaryandApril.

Factorsexpectedtoaffect2015-16

•  Floweringswelldistributedshouldcontributetodistributedcrop.

•  Rainsnotenoughduringthesummer,limitfer.liza.onandbeandevelopmentinspeciallyinlowereleva.ons,es.mate5%lossoncroppoten.al.•  Farmerunabletomakenewplan.ngs,limitedgrowthin2018.

•  StrongrainsinSeptemberandOctobercompensatesomerainloss,slowcropadvance.

•  Marketperceivedtobeverylowbyproducerswillbereluctantsellersandwilldepositcoffeeagain.

•  Yieldsexpectedtobelowerspeciallyatthebeginning.•  Newtaxlawscreatenewcosts.•  StronginferiordemandinCentralAmericaandCaribbeancon.nuesasdemandoutpacessupply.

HONDURAS - SINTERCAFE · Introduction - Macros – coffee in Honduras • GDP: 19.5 billion USD Ag...

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