Coffee Growing is a Complex Business

Pasadena Star News
By: Cynthia Kurtz
Published: 2/25/2015

I am one of the 54 percent of Americans over the age of 18 who reach for a cup of coffee every day.  Most of us don’t think much about where that coffee came from or what was involved in delivering this rich aromatic beverage. 

That changed for me while on a recent trip to Guatemala, one of the largest coffee producing countries in the world.  I learned that coffee is a complex business that affects jobs, GDP and immigration.

Guatemala is just south of Mexico.  It covers about 52,000 sq. miles and has a population of 15 million mostly rural people - only four million people live in cities.  The country is known for its Mayan ruins, handcrafts and textiles, volcanoes and coffee.

The trip was planned by Larry and Mireya Jones, owners of Jones Coffee on South Raymond Street in Pasadena.   Mireya is from Guatemala and they have been in the coffee business for decades.  So of course the adventure included a “Coffee 101 Class” complete with a trek into the field to pick coffee beans by hand. First lesson - to make “good” coffee, most of the work has to be done by hand. 

Coffee is grown in eight regions within Guatemala each having a different tasting profile because of the varying types of soils which depends on how close a region is to one of the ,volcanoes, rainfall (which varies from 36 to 200 inches per year), temperature, and altitude.

Growing coffee is hard, risky work.  Insects, weather and fungus are only a few of the variables that can affect the quality and quantity of the crop.  It’s a highly competitive business with Brazil, Vietnam, Colombia, Indonesia, and Honduras major competitors. A good or bad crop in any one country will impact the bottom line for all the others.

Beans sold by the growers are priced per pound of green beans.  Green beans are beans that have been picked, removed from their pods, fermented, cleaned, sorted, graded by size and quality, but not yet roasted. I counted 12 steps from the field to a bag of green beans involving hundreds of workers and requiring anywhere from two to eleven months depending on how long the beans are stored before shipping.

The risk and competitiveness make the market for green beans highly volatile – from a high in 1976 of $3.20 per lb. to a low in 2001 of $0.39 per lb. The current price is around $1.50 per lb.   When beans dropped to $0.39 per lb., many framers couldn’t make ends meet.  Farms closed and the GDP plummeted. 

That affected immigration patterns. Following the 2001 coffee crash a fresh wave of immigrants came to the United States. According to the last census, an estimate 1.1 million people of Guatemalan origin reside in the U.S.  Forty percent live in the west, primarily in California.  Many arrived after 1976. 

Today these immigrants send annually to Guatemala an estimated $5.6 billion  the single largest contributor to the Guatemalan economy - a 10 fold increase from the estimated $560 million sent prior to 1976.

We truly live in world economy  where  changes in climate or production anywhere can affects us in varying and unexpected ways.  Something to contemplate as you enjoy that cup of coffee.

Sales Tax Revenues are Dwindling

Pasadena Star News
By: Cynthia Kurtz
Published: 2/4/2015

Well maintained roads, clean parks, street lights, and the prompt arrival of police or firefighters in an emergency are services that businesses and residents alike depend on. We don’t often think about what basic services cost. In most cities and counties the primary source of funds for operations is the sales tax. But sales tax revenues are on the decline.

Local government gets just 0.75 percent of the 7.50 percent of the sale tax collected in California - 6.50 percent goes to the state and the remaining 0.25 percent goes into special transportation funds.
Hdl Companies, a local financial services company specializing in helping local government with tax related services, recently released a study about the diminishing and shifting local sales tax. They found that “after adjusting for inflation, per capita taxable sales in California have dropped over 15 percent in the last ten years.”

Hdl cites a number of reasons for the decline - most a reflection of how our tastes and priorities are changing.

First, and probably the most significant change, is the increased preference for shopping on-line rather than in stores. Shopping in stores fell eight percent during the 2014 holiday compared to the 2013 holiday period while on-line shopping increased by fifteen percent.

The National Retail Federation estimated that 44 percent of all holiday shopping was on-line. Fifty percent of office and school supplies are purchased on-line and 60 percent of consumer electronics.
On-line companies that have a physical presence in the state are required to collect sales taxes but those dollars don’t always get collected or returned to the city where the product was purchased.
Technology is reducing what is taxable. We use to buy books, CDs, DVDs, and computer software. But now consumers are more apt to get their music, movies and books digitally. The cloud holds and dispenses more and more of what we need.

What we are spending our hard earned dollars on is also changing. With the costs of necessities such as housing, healthcare, and education increasing as incomes stagnate or decline, there are fewer and fewer discretionary dollars to buy goods that are taxed.

In its effort to stimulate economic development and keep businesses in California, the Legislature has adopted new sales tax exemptions. We need to make California an affordable place to do business. But the exemptions have narrowed the tax base by some $11.5 billion annually and reduced city and county revenues.

Some local governments have responded by asking voters for special tax increases. Today there are 140 cities and 44 counties with tax overrides. Others are trying to increase their revenues by recruiting companies to move to their city or county often by offering sales tax rebates.
It is clear that tax codes are not keeping up with our changing lifestyles and technology. This isn’t just a local government funding problem. It is a problem for everyone who counts on these services.

Situation at Ports Affects Wider Economy

Pasadena Star News
By: Cynthia Kurtz
Published: 1/28/2015

The Ports of Los Angeles and Long Beach are critical to San Gabriel Valley commerce.
Over 6.7 percent of SGV jobs are related to international trade compared to 5.3 percent in Los Angeles County.

Close proximity to the ports is one of the top five reasons businesses locate in the region. So when there is a disruption in port activities, it isn’t long before the impacts are felt here.
A year ago, container ships moved quickly into and out of the Ports of Long Beach and Los Angeles. Containers were unloaded to waiting trucks and trains for distribution to their destinations across the nation. Containers filled with products from overseas were loaded and refilled with products and bulk goods from the United States with ships soon on their way.

What a difference a year makes. Today as many as 15 ships at a time are anchored waiting for a place to dock. Truck drivers trying to pick up or drop off containers wait for hours. Some leave without transferring their cargo only to return the next day and wait again.

And the congestion at the nation’s busiest ports continues to get worse. At least in part the congestion is due to the contentious contract negotiations between the Pacific Maritime Association (PMA) and the International Brotherhood of Longshore and Warehouse Union (ILWA). ILWA represents 20,000 dockworkers along the west coast including the Ports of Long Beach and Los Angeles. Workers have been without a contract since July.

Staffing decisions, mega-ships carrying almost twice the cargo of standard ships, and a recovering economy also play a role in causing the congestion. But regardless of the causes, the resolution of the problem will require management and labor working together. It is unlikely that can occur amid the current mudslinging and angst of tough negotiations.

After seven months of talks, both sides are frustrated and have requested federal intervention. This month a federal mediator began meeting with PMA and ILWA. That is great news. According to the Federal Mediation and Conciliation Service, the government agency that handles labor arbitrations and mediations, 85 percent of mediated negotiations end with an agreement.

In the meantime, the economic damage is mounting. Overseas competitors are quick to jump on the opportunity to discourage purchasing American products. With the opening of the Panama Canal expansion only a year away, East Coast ports are eager to divert cargo and showcase themselves as reliable alternatives.

Closer to home business must find ways to adjust to the delays while continuing operations. Philips Lighting in Baldwin Park has been experiencing shipment delays of lighting components of three to five weeks since August. In order to continue production, components have to be shipped by air dramatically increasing costs.

A SGV recycling company that exports over 125 containers of recycled materials every day started having problems in November. They had to add 300,000 sq. ft. of warehouse space to house materials that had been sold but could not leave the port. The additional cost for storage and handling is $1.8 million and growing.

Huy Fong Foods in Irwindale is also struggling with additional costs. When trucks comeback empty or receiving dates change there are additional costs. Retailers and manufacturers companies throughout the SGV are impacted.

The recovery is still too fragile to withstand any interruption. Let’s get this contact settled so we can get the ports back operating like clockwork.