Risky brew

Grant says coffee blend regulations could upset existing contracts

BY DEANDRA MORRISON
Online reporter
morrisond@jamaicaobserver.com

Saturday, November 11, 2017

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Jamaica Agricultural Society (JAS) President Norman Grant believes that, although the players in the coffee industry already blend imported coffee with locally produced beans, the imposition of a regulation stipulating the specific amount that must be included in that blend could be dangerous.

Grant, who is also CEO of Mavis Bank Coffee Factory Ltd, was weighing in on the Ministry of Industry, Commerce, Agriculture and Fisheries' recent announcement that it is putting stricter regulations in place for the blending of coffee in order to rectify a market that it says has been saturated with imported coffee.

The ministry last month announced that “no imported coffee shall be processed, roasted or packaged for sale in its pure form without a minimum percentage of locally produced coffee”.

Agriculture Minister Karl Samuda had also said that this regulation will come into effect no later than November 15, 2017.

“We don't know what percentage is going to be regulated or whether that regulated amount will affect some of the commercial transactions that we now have,” Grant told the Jamaica Observer in a recent interview.

He explained that some players in the coffee industry have two- and three-year contracts to supply hotels with coffee at a fixed price, and that this might be jeopardised by the cost associated with blending more local coffee.

“We have been using the Jamaican coffee, so we don't have an issue [with] formalising a position around the use of the Jamaican coffee,” Grant said.

When the Observer spoke to Donovan Stanberry, permanent secretary in the Ministry of Agriculture, earlier this week, he was tight-lipped about the specific percentage of locally produced coffee that would have to be incorporated.

However, he said the minimum amount that will be required in the blend will be approximately 20 to 30 per cent.

“A few years ago, we had some issue during the worldwide recession and the financial crisis; there was a downturn in the demand for coffee and the prices went south,” Stanberry explained.

“When the prices go down, it doesn't encourage people to reap or resuscitate their fields. So from that the coffee production went down correspondingly; the prices have started to pick up and production has gone up since then.

“But, during the time when production was down, there was a surge in importation [of coffee] to fill the demand, because we send our best coffee away to Japan and other lucrative markets, and then we will import cheaper coffee from elsewhere and blend it with a little Jamaican coffee for the local market, especially the tourism sector,” he said.

Last year, the Ministry of Agriculture revealed that there was a decline in the demand for Jamaica Blue Mountain Coffee in the Japanese market, where 70 per cent of the country's coffee is sold.

The decline in the demand for Jamaica's coffee in the Japanese market was due to the increase in prices charged by local processors, the ministry had said.

The product had moved from US$27 to US$65 per kilogramme in the two years leading up to 2016, according to the ministry.

Up to last month, Samuda had said that Japan is yet to reach a new agreement with the country about coffee prices and is unwilling to pay the now US$60 per kilogramme for coffee.

Stanberry noted that it was during this period of decline that the country's coffee industry was saturated by imported coffee.

“We have been importing quite a bit during the years that production was down and now that production is back up, what we have discovered is that some of our blenders here are not using enough of our local coffee. So the coffee is ready and reaped, but there is not enough market. So we're trying to rebalance the situation and have a scenario in which all blended coffee in Jamaica must have a minimum percentage of locally produced coffee,” the permanent secretary said.

Last year, Minister Samuda had announced that the ministry would be taking action to impose taxes on green coffee beans imported into Jamaica, in an effort to level the field for players in the local sector and provide resources to develop the industry.

The taxation was part of Bureau of Standards Jamaica's (BSJ's) specification for coffee — JS 61:2016, which is a revision of the 1977 coffee standard — and provided specifications for coffee, as well as mandates for the required blend for exportable High Mountain or Blue Mountain Coffee.

Included were specifications for processing and handling coffee; colour blend requirements; changes in test methods; storage, including lighting conditions; and labelling.

But Grant told the Observer that, to date, there has been no tax imposition.

“I'd like to urge the minister to move with alacrity to bring those regulations into being so that the funding can be used as a catalyst to assist in the expansion of the coffee industry,” he said.

Grant added that the tax should not only be on green beans, but on all imported roasted coffee.

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