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Starbucks buys first coffee farm, will research devastating leaf rust

Packets of Starbucks coffee are seen in a supermarket in Santa Monica, California, January 27, 2011. REUTERS/Lucy Nicholson
Packets of Starbucks coffee are seen in a supermarket in Santa Monica, California, January 27, 2011. REUTERS/Lucy Nicholson

(Reuters) - Starbucks Corp , the world's biggest coffee chain, said on Tuesday that it bought its first coffee farm, where it will research the leaf rust that is devastating Central American crops as well as harvest its own beans.

Starbucks, known for its trendy coffee shops around the world, has purchased an active farm on roughly 600 acres in Costa Rica, which it will convert to a global agronomy research and development center. Financial details were not disclosed.

With the farm's relatively low elevation that ranges from 1,100 to 1,600 feet, the center will research the roya fungus, also known as leaf rust, which kills coffee leaves by sapping them of nutrients and lowering bean yields.

This year, the blight has surprised farmers by climbing to altitudes above 3,400 feet for the first time in Central America and Peru. The fungus has also reached Mexico. Coffee trees growing at such high altitudes had never before been exposed to the disease, which is spread by the wind, and farmers were unprepared for the decimation it has brought.

So severe is the problem that Costa Rican President Laura Chinchilla last week unveiled a proposal for a $40 million fund to help up to 40,000 farmers in the tiny Central American country who have been affected by the outbreak.

Central America and Mexico account for more than one-fifth of global output of arabica beans.

The International Coffee Organization (ICO) recently estimated that some 2.5 million 60-kg bags of crop could be lost in the 2012/13 global coffee output due to the disease, with losses possibly rising to around 4 million bags in 2013/14.

Based on ICO data, those forecasts would equate to between 18 percent and almost 30 percent of Central America's crop in 2011/12.

Starbucks' arabica coffee farm, which currently employs about 70 workers, will continue to harvest beans, to be roasted and sold by the company, a Starbucks spokeswoman said.

The center also aims to help coffee farmers mitigate climate change and support long-term crop stability, programs that are part of Starbucks' goal to source 100 percent of its coffee ethically by 2015. The investment is an extension of Starbucks' $70 million ethical sourcing program.

Starbucks defines ethical sourcing as a process that uses "responsible purchasing practices, farmer loans and forest conservation programs."

Starbucks will also look at innovating with proprietary coffee varietals that could lead to the development of future blends, Chairman and CEO Howard Schultz said in a news release.

Starbucks shares dipped 0.2 percent to close at $56.83 on Tuesday. The stock has gained about 6 percent so far this year.

(Reporting by Marcy Nicholson in New York; editing by Matthew Lewis)

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