Annual Coffee Report on Peru 2023
May 20 - 2023
Coffee Geography Magazine
Coffee production in marketing year (MY) 2023/2024 (April/March) is forecast at 4.2 million 60-kilogram bags, increasing 16 percent from the previous year. Peru’s coffee exports in MY 2023/2024 are forecast at 4.06 million 60-kilogram bags. Coffee production and exports are forecast to rebound, driven by higher international prices.
Production:
Coffee production in marketing year (MY) 2023/2024 (April/March) is forecast at 4.2 million 60- kilogram (kg) bags, increasing 16 percent from the previous year. Better prices are encouraging producers to increase input usage (fertilizers) and to harvest more thoroughly. Peru’s coffee producers have faced financial difficulties in recent years as revenues have not met production costs. MY 2022/2023 was particularly difficult for Peru’s coffee producers.
Lower prices in the previous harvesting season coupled with much higher input prices, particularly fertilizers, resulted in lower yields. Additionally, logistics constraints because of social and political unrest resulted in a lower harvest and less product making it to markets. These factors caused coffee production to fall by 13 percent to 3,636 60-kg bags in MY 2022/2023.
Coffee in Peru is produced throughout the eastern slope of the Andes and production is concentrated in three main growing areas. Peru’s main coffee producing area is the province of Chanchamayo in the Junin region (central highlands), accounting for about 30 percent of total production. Other important producing areas are the regions of Cajamarca and Cusco.
Harvested area in MY 2022/2023 is forecast at 335,000 hectares, remaining at the same level compared to the previous year. Harvest season begins in April and peaks from June to September. Approximately 85 percent of the crop is harvested between April and July.
Average yields in MY 2023/2022 are estimated at 752 kilograms per hectare, increasing 51 percent compared to the previous year. This increase is driven by expectations for higher prices, encouraging producers to invest in fertilization and harvest trees completely.
Coffee yields vary greatly and can reach 42 60-kilogram bags (2,520 kg) per hectare on well-managed plantations. Coffee production is still affected by a coffee leaf rust (Hemileia vastatrix) outbreak that occurred in 2013 and affected roughly 50 percent of the crop. Efforts include phytosanitary treatment and replacement of trees.
Additionally, in 2020, there was a coffee borer (Hypothenemus hampei) infestation which affected coffee fields, particularly in lower elevation lands (under 1,500 meters above sea level). Peru produces almost exclusively Arabica coffee, of which over 70 percent is the Typica variety followed by Caturra (20 percent), and other varieties (10 percent). Roughly 75 percent of Peruvian coffee cultivation occurs between 1,000 and 1,800 meters above sea level. Most coffee is shade grown and plant density averages 2,000 plants per hectare.
Coffee in Peru is mostly handpicked and sun dried. Most of Peru’s coffee producers are small farmers that cultivate coffee on plots of land averaging three hectares. Poor access to credit places constraints on many of the smaller coffee producers. Peru’s private banks reportedly refuse to accept untitled land as loan collateral, forcing most producers to obtain credit either from coffee buyers or informal lenders. As a result, small producers are burdened with fixed-price sales contracts and/or high repayment interest rates.
Small producers often form associations or cooperatives to obtain better prices, improve post-harvest production handling, and cooperate on more effective marketing strategies. Some of the larger of these associations have membership numbers of over 2,000 producers. The more sophisticated of these associations have financial institutions that provide producer loans, which partially subsidize production costs through technical assistance aimed at improving crop quality and yields. Cooperatives will market production directly or through coffee traders.
Consumption:
Domestic consumption in MY 2023/2024 is forecast at 230,000 60- kilograms bags. Coffee consumption in Peru has increased significantly in recent years, however, it remains comparatively low. Per capita coffee consumption in Peru is 750 grams. This contrasts with neighboring Colombia, where per capita consumption reaches two kilograms, and Brazil, where it exceeds four kilograms. Peruvians primarily consume soluble (instant) coffee, which accounts for 75 percent of total domestic coffee consumption. Nonetheless, consumption patterns are changing and a roasted, ground coffee drinking culture is taking root. Coffee consumption among young urban consumers is growing. Consumption levels are now reaching the one-kilogram per capita threshold in this demographic group. Domestic coffee consumption still only accounts for about six percent of total production. Small corner stores (60 percent) and supermarkets (30 percent) account for the bulk of domestic coffee sales.
Trade:
Peru’s coffee exports in MY 2023/2024 are forecast at 4.06 million 60-kilogram bags, increasing 16 percent compared to the previous year. The United States continued to be the top market for Peruvian coffee in MY 2022/2023, accounting for 22 percent of total exports. Other important destinations include Germany, which accounts for 20 percent, and Belgium and Colombia with 12 and 9 percent, respectively. Export prices of Peruvian coffee in MY 2022/2023 increased 27 percent, averaging $5,010 per metric ton (MT). This significant increase has boosted coffee production and yields. Coffee export prices averaged $2,782 MT between 2018 and 2020 and increased to $3,946 in 2021. Current export prices are $4,100 MT and are expected to increase as the harvest season progresses. With some 90,000 certified organic hectares, Peru is the world’s leading exporter of organic coffee. In addition to these certified hectares, a large portion of Peru’s coffee exports are organic by default, attributed in large part to the smaller growers’ inability to pay for costly chemical fertilizers and pesticides. Foreign demand for specialty coffee motivates some smaller growers to seek out specialized certification.
Current certifications that are accessible to smaller coffee farmers include:
- Fair Trade: Certified by Fair Trade Labeling Organizations International (FLO)
- Organic: Certified by several agencies such as USDA’s National Organic Program (NOP), Japanese Agricultural Standards (JAS), Natureland, and the Organic Crop Improvement Association (OCIA)
- Sustainable Coffee: Certified by the Rainforest Alliance
- Café Practice: Certified by Starbucks
- Other certifications include bat friendly and bird friendly
Peruvian coffee producers are frequent participants in international coffee contests, which they consider an important strategy to distinguish themselves as high-quality producers, leading to higher incomes and better prices for producers. Peruvian producers have won the Best Specialty Coffee award at the Global Specialty Coffee Expo several times.
Policy:
The Peruvian Government has made international coffee promotion a national priority. PromPeru (Peru’s export promotion agency) and its overseas commercial offices actively promote Peruvian coffee. At the same time, some local government agencies and non-governmental organizations are promoting organic coffee production to increase farmers’ incomes. Peruvian coffee producers are concerned about the European Union’s (EU) Deforestation Free Regulation that requires that companies exporting to the EU ensure their products have not been produced on land that was deforested after December 31, 2020. These products include coffee, cocoa, wood, palm oil, soy, cattle, and rubber. Under the current Peruvian forestry legislation, it would be rather difficult for coffee producers to access such certification, potentially hampering future exports. Peru’s coffee sector generates 855,000 jobs in mostly remote, impoverished areas of the country. The government, through the National Commission for Development and Life Without Drugs (DEVIDA), encourages coffee production as an alternative crop to coca leaf cultivation. The government of Peru established the National Executive Coffee Council (Supreme Decree 002-2021- MIDAGRI) with the objective of implementing a national promotion plan through 2030. This plan aims to increase coffee consumption. The Council is chaired by the Ministry of Agriculture and its members include the Ministry of Foreign Affairs, the Ministry of Trade and Tourism, DEVIDA, regional governments, municipalities, and producers. The Peruvian government does not keep coffee stocks. All inventories are held by the private sector.