April 26, 2010 / 4:42 PM / 10 years ago

Mexico eyes instant coffee market with robusta push

* Mexico to have world’s biggest instant coffee plant

* Govt wants to reduce imports with new robusta trees

* Some farmers object to lower-priced variety

By Mica Rosenberg

MEXICO CITY, April 26 (Reuters) - Mexico is boosting production of robusta coffee trees as it aims to become one of the world’s top producers of instant coffee, despite objections from some farmers who worry the varieties fetch lower prices, the agriculture ministry and the national coffee association said.

The government is partnering with Swiss food giant Nestle NESN.VX to provide Mexican farmers with improved, high-yielding types of robusta to cut down on the nearly 450,000 60-kg bags of coffee Mexico imports each year.

Coffee comes in robusta and arabica varieties. Arabica is preferred for its smoother taste while robusta is seen as lower quality, and is usually sold at a lower price, to be used in blends and instant coffee.

Only 200,000 to 240,000 60-kg bags of Mexico’s 4.6 million bags of annual coffee production is robusta, as farmers chose arabica to win higher premiums.

But demand for the cheaper robusta beans is set to explode in Mexico, a top ten global coffee exporter, as Nestle plans to increase the capacity of its soluble coffee plant in Toluca, outside of Mexico City, by 40 percent, making it the largest in the world.

The expansion is part of a $390 million investment by Nestle in Mexico over the next three years.

“The market is here in our country. Mexico has a deficit (in robusta coffee),” Rodolfo Trampe, head of the national coffee organizations Amecafe, said in an interview.

“Coffee shouldn’t be imported until every last gram of robusta in the hands of (Mexican) coffee producers is absorbed,” he said.

This year the agriculture ministry says nearly 5,000 acres (2,000 hectares) will be planted with new robusta trees that will mature in a couple of years.

HARD TO COMPETE?

As consumers have cut spending due to the economic crisis, some are shying away from more expensive coffee drinks made with arabica-heavy espresso blends. In classic tea-drinking markets like Russia and China, instant coffee is popular.

But some farmers fear promoting the lower-priced beans will erode their earnings.

“Nestle is interested in having cheaper coffee to boost its profits and that’s why it is promoting increased production of robusta coffee in Mexico,” the National Council of Farmer Organizations said in a statement.

“This is not viable because of the higher costs of production in Mexico compared to Vietnam, Indonesia and African countries,” the group that represents small producers said.

Nestle did not respond to request for comments on the robusta planting program but Trampe said arabica production will not be affected by the plan. The push is focused on Mexico’s low-altitude tropical south, where arabica varieties fare badly and the climate favors the heartier robusta trees.

In the late 1990s and early part of this decade, Vietnam dramatically increased coffee output leading to a glut in global supply and steep slide in prices. Many farmers fell into poverty or were forced to abandon their fields.

Vietnam is now the world’s No. 2 coffee producer and this year is expected to produce about 18-19 million 60-kg bags of robusta, or about 15 percent of the world’s total.

Mexico’s coffee output has steadily dropped and it is now the world’s 10th-largest exporter, down from the No. 4 spot in 1999/2000, according to statistics from the international coffee organization. (Additional reporting by Adriana Barrera; Editing by Marguerita Choy)

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