Business

Coffee processor expects tighter profits, but small farmers may see higher income

Friday, May 16, 2014    

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Large coffee processor Mavis Bank Coffee Factory (MBCF) expects to earn less profit this year, but a small farmer with sufficient coffee will earn more money.

It's a slight rebalancing of fortunes for the industry currently suffering a coffee shortage.

"The industry will face reduced profits this year because overall the volumes of cherry coffee are down considerably and based on the higher prices paid to farmers,"said Jeffrey Hall, managing director at Jamaica Producers Group (JP), which owns a 50 per cent stake in the factory.

"We had a strong 2013. But the current crop is down," he explained about MBCF, which earned some $10 million in net profit in 2013.

JP and Pan Jamaica Investment Trust acquired MBCF from the state agency Development Bank of Jamaica (DBJ) in 2012. The DBJ expected to net US$4.5 million from the sale of MBCF's US$11 million in assets.

"We are preparing the platform for the rebuilding of the industry,"said Hall.

The Jamaica Coffee Exporters Association (JCEA) expects the supply of coffee to meet demand in about three years. Last month the association indicated that the public should expect another round of double-digit price hikes based on shortage of supply, inflation and double-digit currency movements.

Farmers are earning about $5,000 a box of coffee compared with some $2,500 a year ago, reasoned agriculture minister Roger Clarke months earlier at a Coffee Industry Board retreat in Kingston earlier this year.

One executive at a processor who requested anonymity told the Observer that a rival processor offered up to $7,000 a box from select farmers. However, not all farmers will have sufficient quantities to earn higher profits based on reduced yields affected by the fungal disease 'Leaf Rust' as well as the pest 'Berry Borer'.

Jamaica Blue Mountain and Jamaica High Mountain coffee production is expected to dip by more than one-third to 130,000 boxes and 31,000 boxes respectively for the ensuing 2013/14 crop, according to the JCEA.

The cash-strapped government recently divested its holdings in the two largest coffee processors MBCF and secondly Wallenford to the Michael Lee-Chin led Portland Private Equity. The new owners hold interests ranging from agriculture to banking which should result in adequate cashflow at the factories during for the downturn.

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