Uncle Sam is investing in your cup of joe.
The U.S. Agency for International Development said Monday that it will spend $14 million to fight coffee-leaf rust, a disease that has taken a bite out of the quantity and quality of the arabica crop in northern Latin America, pushing up prices for some of the world’s most coveted beans.
USAID said it is joining Texas A&M University’s World Coffee Research to develop rust-resistant varieties of arabica plants and improve monitoring of the disease, which the government estimates has already caused $1 billion in economic damage since 2012. The fungus, also known as roya, thrives on the leaves of coffee trees, choking the source of nutrition for the coffee cherries that encase the beans.
Exports of coffee beans from Central America, Mexico and the Dominican Republic have dropped 20% to about 7.4 million 60-kilogram bags in the first six months of the crop year that began Oct. 1, 2013, compared with the year-earlier period, the National Coffee Association, a Guatemala-based trade group reported this month.
The agency said production will fall by 15% to 40% in the coming years, which could result in the loss of more than 500,000 jobs.
“Coffee rust threatens more than your morning coffee—it affects jobs, businesses and the security of millions across the Americas,” said USAID’s associate administrator Mark Feierstein in a news release. “We must tackle this outbreak to ensure farmers and laborers have stable incomes, don’t start growing illicit crops, or be forced to migrate because they can no longer support their families.”
While Central America and Mexico account for about 11% of global coffee output, the supply squeeze comes as arabica coffee, the variety bought by roasters like Starbucks Corp., are already expected to be in short supply.
Growers in Brazil, the source of around one-third of the world’s coffee, are grappling with the effects of a severe drought, which is expected to mean lower production and higher prices.
Arabica-coffee futures are already up nearly 70% this year, and Central American coffees are even more expensive.
The premium on some Costa Rica and Guatemala coffees have more than doubled since the start of the year, to about 40 cents over the benchmark futures contract, said Christian Wolthers, president of Wolthers Douque, a coffee importer in Fort Lauderdale, Fla.
Coffee rust is tough to fight, and sometimes doesn’t respond to fungicides.
“This is the year when the strongest impact of the rust has shown up,” said Mr. Wolthers, pointing to growers replacing their plants or pruning them to fight the rust.
read more: http://blogs.wsj.com/moneybeat/2014/05/19/u-s-to-spend-14-million-to-battle-coffee-fungus/