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

HONDURASPRODUCTIONGROWTHANDOUTLOOKPresentedbyChris.anLeSage,Email:[email protected]éSA/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

2.1

3.0

2.4

3.0 3.2 3.4 3.2 3.2

4.0

5.6

4.44.2

5.0

5.8

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Millionsof6

0KGBAG

S

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

FarmSizeDistribution

7+HA

2-7HA

0-2HA

34%

70%

36%

25%30%5%

0%

20%

40%

60%

80%

100%

VOLUME PRODUCERS

25,000

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

•  95%percentofproducerspickcoffeewiththeirownfamily.

70,000

5,000

1000005million60kgbags

1.5million

1.8million

1.7million

AgeandGenderdistributionofProducers

18-309%

31-4028%

41-5027%

51-6020%

61+16%

Age

•  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

10282

65

28

28

28

0

20

40

60

80

100

120

140

HIGHESTCOSTPRODUCER AVGSMALL LOWESTCOSTPRODUCER

FARMTOFOB

FARMGATE+

130

111

93

USD/46KG

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

Businessdrivers-costcomponents

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

$82FARMGATE

$41Labor

$18Other

0

20

40

60

80

100

120

INPUTS LABOR PICKING WETMILLING/DRYING ADMIN INTEREST LOGISTICS FARMTOFOB

$23INPUTS

$4LOGISTICS

$24FARMTOFOB

$111TOTAL

Businessdrivers-Costandsellingprice

0.0

50.0

100.0

150.0

200.0

250.0

COST

PRICE

•  Averagecompositesellingpriceis$150.00FOB

GraphofcostandSellPrice(10YEARS)USD/46KG

Businessdrivers-ProPitability

•  Theweightedaverageprofitabilityhasbeen$47per46kgforthelast10years.

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

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

USD

PER

46K

G

AVERAGEPROFITS

Businessdrivers-ProPitability

•  Theweightedaverageprofitabilityhasbeen$47per46kgforthelast10years.

•  Thatcomesto$3300perproducerperyear

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

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

USD

PER

46K

G

AVERAGEPROFITS

ProducerIncomeSummary

•  Overthepast10yearstheaverageproducerhasmade

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




•  MinimumsalaryinHondurasis$4350peryear.





•  CostofbasicfoodinHondurasis$3000peryear





•  CostofbasicfoodinHondurasis$3000peryear

•  Theproduceriss.lllivinginpoverty

Businessdrivers-Price/growthcorrelations

$0

$50

$100

$150

$200

$250

$300

0.0

1.0

2.0

3.0

4.0

5.0

6.0

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

2.1

3.02.4

3.0 3.2 3.4 3.2 3.2

4.0

5.6

4.4 4.2

5.010.0

12.0

10.2

12.2

11.011.8

12.913.7

13.112.6

14.9

20.0

16.5 16.5

18.8

0.0

5.0

10.0

15.0

20.0

25.0

-

1.0

2.0

3.0

4.0

5.0

6.0

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)

ROYA

0

50

100

150

200

250

300

350

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

5.6

4.4 4.25.0

5.8

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

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

25%

•  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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pre-Roya Post-Roya

5568

4532

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

1YR

1-2YRS

3-5YRS

6-9YRS

9-15YRS

16-25YRS

•  65%ofplanta.onsarelessthan9yearsold.•  Planta.onshavebeenrenewedandwillnot

presentaproblemforthenext10years

ResourceAnalysis-Land

•  Nomajorconflictswithpopula.oncenters•  Hondurasdoesnothavealandlimita.onfor

coffeeplan.ng.

57

52

3

55

AllofHonduras112,000km2

Landabove1000mSuitableforcoffee

55,000km2

Coffeeplanta8ons3,000km2

ResourceAnalysis-Rains(Acompositeof5regions)

2602

2224

1767 1827

1159

0

500

1000

1500

2000

2500

3000

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.




•  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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