Assessment of the coffee industry in Jamaica

This report assesses the Jamaican coffee industry, especially the non-Blue Mountain coffee sector, with a focus on its potential for expansion and on the constraints thereto. Topics covered include the industry"s history, legal and institutional framework, and present status; the role of the Coffee Industry Board and its subsidiaries; deregulation; coffee cooperatives; foreign involvement; and planned development over the next five years. Because Japan purchases around 80% of Jamaican coffee, demand is price inelastic and consistently exceeds supply by a large margin. However, because Jamaican yields are low and production and processing costs are high, the coffee grower"s average expected return is 22-23%. With the cost of commercial borrowing at over 35%, coffee is thus a poor investment unless the farmer can obtain below-market rates on his loans. Although yields are expected to more than double by the end of the decade, expansion of the coffee industry is constrained by: (1) a shortage of long-term financing at reasonable interest rates, especially for small farmers; (2) high fixed processing costs spread over a low volume of coffee; (3) inadequate roads in coffee producing areas; (4) a shortage of nursery seedlings; and (5) a lack of management and leadership in the non-Blue Mountain cooperatives. A.I.D. can play a significant role here, especially by strengthening coffee cooperatives, helping reduce processing costs, improving roads, and funding credit programs.