During the past 15 years Peru has made its entrance onto the world stage as one of the leading producers of top-quality coffee. Exports have risen dramatically during this time and look likely to continue doing so thanks to the favourable growing environment high in the Andes Mountains. The National Coffee Board ( Junta Nacional del Café, JNC) expects production to increase by 50% by 2025, while the crop brought in an estimated $1.4bn worth of export earnings in 2011.

PRICE SWINGS: Peru has only recently begun mass producing and exporting coffee beans. Coffee prices have risen dramatically, with the price paid to Peruvian coffee growers increasing from $1174 per tonne in 2000 to $2289 per tonne in 2010. However, at one point in 2002, Peruvian coffee sold for just $696 per tonne (a third of the current price), chiefly due to a global dip in the price of coffee. In 2011 the price of coffee soared to roughly $3500 per tonne in August before dropping sharply towards the end of the year, bringing the average price for 2011 down to $2733 per tonne.

According to figures from the Ministry of Agriculture (Ministerio de Agricultura, MINAG), from 2000 to 2010 coffee production rocketed, going up from 158,283 tonnes in 2000 to 264,282 tonnes in 2010 and peaking in 2006 and 2008 above 273,000 tonnes. In 2011 coffee production soared to new heights, with yields increasing 14% on 2010 to reach 300,494 tonnes. The continued growth of land dedicated to coffee cultivation has been vital in this expansion; Peru’s coffee fields totalled 228,269 ha in 2000 and 349,354 ha in 2010 – an increase of 53% over 10 years. The Peruvian Exporters’ Association (Asociación de Exportadores del Perú, ADEX) predicted a further 10-15% increase in land dedicated to coffee in 2011.

GLOBAL MARKET: MINAG also reports that export revenue derived from the sale of coffee rose 57% in 2011 to $1.4bn, primarily due to higher international prices. Every year Peruvian coffee makes it way to more than 40 countries. Neighbouring Colombia – already one of the world’s best-known producers – imports nearly a quarter of Peru’s exports. Europe is the largest customer, accounting for 65% of external sales.

Along with grapes, avocados, mangos and asparagus, coffee has driven the agriculture sector’s growth in exports even amidst a decline in demand from Europe and the US. The US and Europe remain the largest buyers of Peruvian coffee, but it is becoming apparent that the real growth markets lie elsewhere.

Coffee consumption is still growing rapidly in Asian markets such as China, where it is estimated to be increasing at an average rate of 15-20% a year. The Peru-China free trade agreement came into effect in 2010. In the 10 months that followed agricultural exports to China rose by 62%, thanks largely to Peruvian coffee being shipped to China for the first time since 2005.

DOMESTIC CONSUMPTION: While Peruvian coffee continues to develop its reputation overseas, domestic consumption is also rising. According to MINAG, annual per capita consumption reached the half-kilogram mark in 2011 and is anticipated to double by 2016. Only an estimated 5% of total coffee production remains on the domestic market, according to Victor Noriega, the head of MINAG’s General Directorate of Agricultural Competitiveness.

As part of the domestic campaign to promote coffee products, MINAG launched the “Expo Café Perú” in October 2011 in Lima, with this following up on the “Day of Peruvian Coffee”, on August 27, 2011. The potential for increasing domestic consumption lies with Peru’s middle class, which is expanding with the economy.

The industry’s success also bodes well for other crops that grow well in the mountainous sierra and selva areas, such as cacao, an increasing important revenue earner for local producers. According to MINAG, export revenue from cacao increased 31% in 2011. While Peru has established itself as the world’s top producer of organic coffee, it has also become the second-largest producer of organic cacao.

A NATIONAL EMPLOYER: Coffee farms are mainly concentrated along the central Andean spine of Peru and estimates put the total number at around 200,000, mostly small, family-run operations. Throughout the entire production and shipping process it is estimated as many as 2m Peruvians, roughly 7% of the population, are employed directly or indirectly in the nation’s coffee industry. According to the JNC, more than 150,000 families rely on coffee on as their sole cash crop, and due to their small operational size most farm owners typically have limited capacity to negotiate business on an international level. For this reason the processing and packaging of coffee beans is achieved primarily through larger cooperatives. Associations such as the National Organisation of Women Producers of Coffee and Cocoa as well as the National Organisation of Coffee Youths have been created to help promote business growth within certain segments of society.

QUALITY ASSURANCE: Most Peruvian coffee belongs to the Arabica family, and various varieties of this strain are grown throughout Peru including Typica, Bourbon, Pache, Caturra and Catimor. Peruvian coffee beans are considered to be of very high quality and as a result the country has already developed a strong reputation in niche, specialised and organic blends. ADEX predicts that external sales of organic coffee, already the largest in the world, grew by 30-35% in 2011. The quality of Peruvian coffee was affirmed by the Speciality Coffee Association of America in 2010 when Tunki coffee, grown in the south-eastern Puno region, was given the “2010 Coffee of the Year Award”. Tunki coffee is found in just one Peruvian establishment, but is exported to the US, Germany and England, making it indicative of the export-oriented nature of the industry.

OBSTACLES: Although Peru’s blossoming coffee industry has come a long way, impediments remain. Infrastructure development in the highlands region, home to the coffee industry, is well behind the western coast. Further consolidation through the creation and merging of coffee cooperatives, like improved infrastructure, will boost efficiencies. Sustaining and even intensifying marketing campaigns will help the country establish a global reputation for quality coffee. Without the development of a true Peruvian brand recognised by consumers and baristas around the world, it will be difficult for the industry to reach the production levels of competitors such as Colombia, Kenya and Indonesia.

Peru has experienced a highly productive decade that has seen coffee become the agriculture sector’s most valuable export and an attractive area for investment. As a result it has already been placed on the same mantle as pisco and asparagus. It now seems only a sharp downturn turn in global coffee prices could prevent long-term growth. That is unlikely to happen. In April 2011 the International Coffee Organisation reported record coffee prices of $231 per pound, more than quadruple the $46 per pound price in 2001. Global prices have since retreated somewhat to $188 per pound in January 2012 due to increased supply forecasts; however, growth in global demand over the past decade will likely continue due to new consumption in emerging markets. Despite the challenges, Peru’s coffee industry is poised to capitalise on this and continue its growth.