JIS News

Minister of Agriculture and Fisheries, Hon. Dr. Christopher Tufton, yesterday (December 14) announced a $310.5 million emergency loan fund for coffee dealers, which will provide them with cash flow to meet capital requirements.
Jointly funded by the Export/Import (EXIM) Bank and the Development Bank of Jamaica (DBJ) the loan, which will be offered through the Coffee Industry Board (CIB), has become necessary due to the inability of dealers to sell excess stock, as a result of low demand in the major Japanese market. The loan will help with the take-off of the current crop and will cover payment to farmers for beans and other capital expenses.
“At present, the sector is running at huge excess capacity, as demand is not close to matching the supply – a combination of the structural changes in Japan, as well as the global recession and the additional competition that we are confronting from other gourmet coffees,” Minister Tufton said at a press conference at his Hope Gardens office.
In addition, he said, Japanese importers, which purchase 90 per cent of Blue Mountain Coffee, and have traditionally advanced payments to marketing companies to meet expenses, have indicated that they would not be able to advance those resources due to the global recession.
As a result, the Minister said, local marketing companies are now called upon to provide their own financing “and therefore, there is a shifting of the risk from Japan and to local marketing companies, and by extension, the Jamaican coffee farmers.”
He pointed out that of the current crop, almost 100,000 boxes of Blue Mountain coffee have been purchased by the Wallenford Coffee Company and the Mavis Bank Coffee Company, with a balance of some 135,000 boxes in the Blue Mountain to be reaped.
It is estimated that the financing arrangement, which was approved by Cabinet on December 13, will provide for the purchase of those 135,000 boxes. The first payment to the farmer will be $1,500 per box with an anticipated final payment of around $800 per box. “What this means is that the farmers are going to have to adjust their expectations and take a reduction in the price that would normally be paid to them for their efforts,” Minister Tufton explained.
He further informed that lien will be placed on the coffee beans to mitigate the risk of the loan, so the coffee itself would be part of the collateral against the loan.
“However, in addition to that, the Agro-Invest Corporation (AIC) , the investment promotions arm of the Ministry will further secure the loan by using a property at Amity Hall in St. Catherine as additional collateral,” he said.
The CIB will also purchase a vacuum packing machine in order to vacuum pack the coffee beans that are purchased from farmers. This will extend the shelf of the green beans to 18 months from the usual eight to 10 months, that will allow for increased marketing opportunities. The CIB will also be storing the processed and vacuum packed green beans.
The Agriculture Minister said that the loan “should signal a major restructuring that will have to take place if the coffee industry in Jamaica is to survive and to go forward in a sustainable way.”
He said also that the marketing strategy will have to be re-thought, with an adjustment in cost to allow for greater efficiency.