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In Battle Against Devastating Coffee Fungus, Starbucks Buys Its First Farm

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The fungus, coffee rust, is very bad for business and has already driven Guatemala to declare a state of emergency. Starbucks is taking steps to eradicate it.

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In 1861, coffee farmers in Kenya reported an orange fungus that was growing on their crops, threatening their yield of coffee beans. By the end of the 19th century, that orange fungus had decimated coffee crops in Java, India, Sri Lanka, and Sumatra. By 1920, the fungus, called coffee rust (hemileia vastatrix), was so widespread in Africa and Asia that the Arabica variety almost went extinct. The coffee industry of the Philippines nearly collapsed, but was saved by the coffee species Liverica, which was found to be resistant to the fungus.

Until 1970, coffee rust (pictured) was contained to Africa and Asia. Then it was discovered in Brazil. For decades, however, the fungus never posed a serious problem to coffee production in South America. That is, until this year, when almost all of Guatemala's coffee crop was ruined by the fungus. In early February, a state of emergency was declared. Across South America, coffee production forecasts have been reduced for the next growing season. A combination of ecological changes (including the rise in temperature) may be behind the blight.

Now, in order to study the devastating fungus, and to develop methods for eradicating it, Starbucks (NASDAQ:SBUX) has purchased a farm in Costa Rica, marking its first ever acquisition of land for crop growing.

The 600-acre farm consists of land ranging from 3,600 to 5,500 feet above sea level and will allow the company to factor into its considerations the role that altitude plays in the fungus and in coffee-growing in general. Researchers will work on developing new varieties of coffee through hybridization, with a view to creating a coffee type that can resist coffee rust, like the Liverica strand. Starbucks sources a solid majority of its beans from Latin America, so the research will be crucial. CEO Howard Schultz has said that he won't rule out acquiring even more land for research and development.

As senior vice president Craig Russell said to the Wall Street Journal, "It's a dynamic situation and we will absolutely use this farm for testing different methodologies and ways to use new types of coffee trees we've developed that have become more disease and rust resistant." Starbucks has also said that it will openly share its conclusions and developments with coffee farmers that don't supply the company.

Follow me on Twitter: @JoshWolonick and @Minyanville
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