High Coffee Prices May Not Be Enough to Increase Production

NEW ORLEANS-Some of the largest companies in the world of coffee farmers are paying more for increasingly expensive grains, but chalk it up to corporate responsibility.
Ensure the provision of long-term coffee is vital, even at higher prices, executives say.
Coffee prices have risen over the past year, mainly due to shortfall in production, record companies and consumers with higher costs.
U.S. roasters and coffee retailers Starbucks Corp., Kraft Foods Inc. and Massimo Zanetti USA prices rose last week under pressure to raise the cost of green coffee.
Arabica coffee futures on IntercontinentalExchange have more than 50% in the last six months of bad weather cut output in major production countries such as Colombia.
However, near-record prices brought about by mild washed arabica beans, prized by coffee drinkers to the rich flavors that occur, may not be enough to persuade farmers to increase production. Many farmers are reluctant to cycles of boom and bust of coffee and the concern that prices will fall by the time new plants bear fruit.
"I think I can count on my hand the number of farmers who would recommend their children to be producers of coffee," said Nicolas Huillet, a marketing manager of Nestlé SA. Mr. Huillet is running at 10 years, 500 million Swiss francs (550 million) plan to Nestlé launched in August to double the number who buy directly from farmers and cooperatives by paying higher prices.
Speaking at the meeting of the National Coffee Association on Saturday, Mr. Huillet said that supplies of coffee to the company, which buys 10% of green coffee in the world, could vanish "if farmers do not have sufficient incentive to grow."
Starbucks says he has always paid to farmers "fair prices."
"If you want a good coffee, you have to pay," said senior vice president of Starbucks, Dub Hay. He declined to provide specific details of the contracts, but said the company pays some farmers a premium price rather reference the ICE contract "C" or a flat rate.
But despite high prices and strengthening demand, increased production is a challenge. Arabica coffee is considered the highest quality raw robusta coffee, which is easier to grow. Arabica coffee trees are usually planted on hilly terrain, high altitude and are expensive to maintain.
Some farmers, fearing a sudden drop in prices, do not want to make the investment. A new plant in general, it takes three or four years to a major crop.
"Farmers have suffered bad prices for many years," said Enrique Castillo, manager Coopeatenas field, a large coffee cooperative in a lush region of Costa Rica's Central Valley. "What people do not want to do is invest and then have the price falls."
Mr. Castillo said that while members of the cooperatives receive a premium of at least $ 10 above the market price per bag of 46 kilograms of Starbucks, one of its main customers, many of them do not encourage their children to stay in the business.
"[The farmers] to use that money so they can send their children to school," he said. "The children of coffee producers are professionals."
The limited availability of coffee is more troubling to some buyers of green coffee from the high prices, which could help, at least, to maintain a stable supply.
"There must be a base price to keep farmers in business," said Don Holly, director of quality roasting and Green Mountain Coffee Roasters Inc. "At this stage, we are more concerned about supplies."
He said the Vermont-based company pays more than "$ 3.50 per pound of beans.
On Tuesday, the contract for Arabica for May delivery on ICE fell 1.3% to $ 2.7355 a pound.