* Fall exceeds market expectations, could underpin prices
* Some farmers harvest cocaine-ingredient coca instead of
* Dim outlook seen for 2021 production
LONDON/LIMA, Oct 19 (Reuters) - Coffee output in Peru, the
world's fifth largest arabica coffee exporter, has tumbled 10%
this year due to low prices and migrant labour shortages caused
by the COVID-19 pandemic, the head of the country's national
coffee federation told Reuters.
The drop in Peruvian output could help underpin world prices
as it far exceeds market expectations. Broker Marex
Spectron said the country's output was likely to fall 2.5% this
year in its latest report.
Over the past three years, world coffee prices have
traded about 30% lower than the prior 10-year average, putting
higher cost producers like Peru under increased pressure.
Lorenzo Castillo of Peru's Junta Nacional del Café (JNC)
said the slump in coffee output was also caused by farmers
moving to work in fields that harvest coca, a plant used locally
for its medicinal properties but also to produce cocaine.
Peru harvested 3.5 million 60 kg bags of coffee between
January and August, versus 3.9 million in the same period of
2019, Castillo said.
"It was due to a lack of labour between March and June
because workers could not move to the production valleys (during
the coronavirus lockdown)," he said.
While some farmers have moved into more profitable crops
like cocoa, those working on coca fields could earn 120-150
soles ($34-$42) per day versus 40 soles ($11) in coffee,
Peru closed almost all economic activity in March as it
tried to curb COVID-19 infections and deaths, which stand at
around 100 per 100,000 inhabitants - the highest in the world.
Peruvians have long been shifting away from coffee. The
total planted area fell 17% between 2012 and 2019, according to
government figures, and possibly dropped another 3% this year,
He said prospects for 2021 were not encouraging because of
the coffee berry borer pest and because farmers have very little
working capital to buy key inputs like fertiliser.
The U.S. Department of Agriculture said in July that
Peruvian coffee farmers are facing a severe crisis, abandoning
their fields as global prices fall below their production costs.
"Often you see quite a bit of Peru coffee going to the (ICE)
exchange, That's not going to be the case this year," said
Rabobank analyst Carlos Mera.
He added that while Colombia and Honduras could make up for
Peru's lost output, there is a lot of uncertainty over output in
other central American countries amid the pandemic.
A U.S.-based coffee importer said he had recently reduced
shipments from Peru, citing COVID-19 related transport problems.
Coffee is Peru's fourth-largest agricultural export. The
sector employs about 200,000 farmers directly and 2 million
people indirectly, according to the United Nations Development
($1 = 3.5748 soles)
(Additional reporting by Marcelo Teixeira in New York; Editing
by Veronica Brown and Susan Fenton)