Coffee cess
JAMAICA IMPORTS around 433 tonnes of green coffee beans each year to shore up its own supplies. The imports represent around $300 million (US$2.3 million) of expenditure annually that critics say can be better spent domestically to provide jobs and grow coffee output.
The foreign beans are blended with expensive Jamaica Blue Mountain (JBM) coffee for sale locally and overseas. It’s done to create a cheaper blended coffee, especially for the hotels and some cafés. Consumers can still buy 100 per cent JBM at twice the price, or about US$60 per pound roasted.
On Wednesday, Karl Samuda, minister of industry, commerce, agriculture and fisheries, announced plans to impose a cess on coffee imports in an effort to incentivise local production of cheaper coffees, called ‘lowland’.
The new policy is a victory for the Jamaica Coffee Growers’ Association (JCGA), whose members lobbied for the cess.
“We have been proposing that for four years now at the JCGA. We came up with the proposal and submitted it to the coffee board from when I was chairman,” said John Minott, director of Jamaica Standard Products, which produces the largest volumes of high mountain coffee.
The minister announced the import cess at the unveiling of new coffee standards – called the Jamaica Standard Specification for Coffee – at the Bureau of Standards Jamaica (BSJ).
Most players in the industry actually want the cess, but not all think it will spur production of lowland and high mountain coffee.
“I have no issue with the cess on imported coffee. However, it is not to be used to promote the growing of lowland coffee, but to be used to market JBM and provide better extension services and education for the farmers,” said Jason Sharp director at Coffee Traders Limited, one of the largest processors which controls a series of JBM brands. Sharp said that cost of imported coffee remains so cheap at US$1.45 per pound that local producers can never compete and should instead focus on growing expensive coffees. The cost to process coffee locally is US$2 per pound, he said. “No, I do not believe we could produce coffee at the prices on the commodity markets,” said Sharp. “Jamaica should import cheap and export high.” He said the cess should also be applied to importation of finished products, including instant coffees. “We also need to note that the hotels that operate in Jamaica have to compete on a global scale and therefore have a standardised food cost platform. They will not pay significantly higher prices than what exist now and will turn around and go to the Government to get permits to import coffee directly. This will reduce income for the coffee sector, and no one except the
hotels will benefit,” Sharp said.
Mark McIntosh, who oversees the operations of Wallenford Estate and Mavis Bank Coffee Factory – which combined are the largest JBM processors – declined to weigh in on the issue. McIntosh is the point man for billionaire Michael Lee-Chin, who ultimately controls both companies. Additionally LeeChin is a top 10 shareholder in Salada Foods Jamaica, the only local instant coffee processor.
In 2014, during a coffee shortage, the island imports began to grow, which led the regulators to consider a coffee importation policy. Between 2011 and 2015, coffee imports into Jamaica grew by three per cent per annum, according to United Nations data.
Blue Mountain coffee, grown on the island’s eastern mountain range, receives the highest retail price at some US$60 a pound, while High Mountain, grown in central and western side of Jamaica, garners about US$30 a pound. Lowland coffee is grown at elevations below 1,100 feet.
Tax on green beans
“It is our intention to tax green beans coming into Jamaica. We are going to put a cess on green beans because we put a cess on locally produced beans. So we are levelling the playing field,” said Samuda on Wednesday.
“I know it’s going to mean a little more cost, but I sincerely hope that by doing that, we will get the resources that we need to encourage, train and promote the expansion of lowland and high mountain coffee,” the minister said.
The coffee industry earned some US$24.1 million in exports but imported US$2.3 million in green beans, according to world trade data analysed by the Financial
Gleaner. Half of the imports come from the United States at US$1.1 million, followed by Mexico at US$523,000, Colombia at US$317,000, and Honduras at US$226,000.
“For the life of me, I cannot understand why more money has not been spent in this industry to promote the growth of lowland coffee and high mountain coffee so that we can blend the coffee with our locally grown coffee,” said Samuda.
“Therefore, Mr President, let me encourage you to use your good influence and resources to develop the lowland and high mountain coffee along the length and breadth of Jamaica wherever it can be best produced,” said Samuda.
The legal importation of coffee requires the approval of the agriculture minister, who acts on the recommendation of the Coffee Industry Board.