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By Gustavo Palencia and Isabella Cota
EL PARAISO, Honduras/PEREZ ZELEDON, Costa Rica (Reuters) - Central American coffee industry officials say the region's arabica crop is weathering an outbreak of leaf-rust fungus, but try telling that to small-hold farmers like Graciela Alvarenga.
Her 0.3 hectare (0.74 acre) plot in Honduras' El Paraiso region near the border with Nicaragua has been so hard hit, she now uses the dried leaves and branches of her coffee plants as kindling to cook her breakfast.
"This year I don't think we'll produce anything," Alvarenga said in a recent interview, hunched over her stove and stirring a pot of beans. "We've lost nearly the whole farm."
A growing chorus of coffee growers like Alvarenga in the region say their crops are suffering far greater damage than their own associations' estimates suggest.
While the London-based International Coffee Organization (ICO) predicted in March that the coffee leaf rust, also known as "roya", will slash regional output by a fifth, a July Reuters poll of coffee industry leaders forecast a more modest 4.7 percent fall.
"There have been increasing voices suggesting the damage is less than previously expected," Mauricio Galindo, the ICO's head of operations, told Reuters.
Last year, the blight hit each of Central America's coffee-producing nations and Mexico, home to about 20 percent of the world's arabica coffee production, threatening to sharply reduce yields and much-needed export revenues in some of the hemisphere's poorest countries.
Arabica coffee beans are of higher quality than robusta beans and are used in expressos and gourmet specialty blends.
Compounding the problem for poor farmers are the expectations for record harvests in major producers like Brazil and Vietnam, and improved yields in Colombia, which are keeping prices down. In fact, the price of the most-active arabica futures contract has fallen more than 60 percent since peaking above $3 per pound in 2011, just as production costs are shooting up in Central America and Mexico.
"The roya hurt us enough, but the low prices have come to kill us completely," said Felipe Mendoza, who owns a two-hectare farm in El Paraiso.
However, officials across the region say losses appear to have stabilized due to a drop-off in the rainfall that has promoted the growth of roya, and to effective use of fungicide.
In Nicaragua, for example, 36 percent of the country's 126,000 hectares of coffee plantings are currently listed by the agriculture ministry as infected, barely changed from 35 percent at the beginning of the year.
Meanwhile, in January, the 2013/14 coffee crop in Costa Rica was seen coming in 20 percent lower than the previous crop due to roya. But the country's coffee authority ICAFE predicted last week that output next season will instead fall by just 13 percent to 1.4 million 60-kg bags.
That sounds too optimistic to Isidro Corrales, a farmer in Costa Rica's central Perez Zeledon region.
"I told a man from ICAFE recently, 'You must be lying to the people. I don't even see 30 percent of the harvest here,'" he said. "I am hoping for a miracle."
'A MANAGEABLE LEVEL'
Roya causes powdery orange spores to appear on the underside of infected leaves. The wind-borne fungus eventually causes leaves to turn black and fall off, killing or severely weakening the tree.
Experts say smaller farmers are worse off since they often lack funds to buy pricey fungicides, which typically must be sprayed several times.
"They have fewer arrows in their quiver when it comes to what you can do in terms of remediation or prevention," said Ric Rhinehart of the California-based Specialty Coffee Association of America.
Roya has also struck the region's larger plantations.
Tomas Edelmann owns the 287-acre Hamburgo farm in Mexico's southern Chiapas state, the country's leading coffee-producing state and also its poorest. He says about half his crop has been destroyed by roya, meaning he will only be able to hire half of the 600 to 1,000 seasonal workers he normally employs.
In Honduras, the region's top coffee producer, a quarter of the country's nearly 280,000 hectares of coffee plantings have been infected by roya.
But Victor Molina, head of the country's national coffee institute IHCAFE, says the damage caused by the plant disease has yet to reach disaster status.
"It is still at a manageable level," he said, noting that production is only down about 5 percent this season. "The affected areas have not increased and we are working especially to help the smaller farmers."
In El Salvador, the region's smallest producer, roya has infected half of the country's coffee plantings and next season's production is seen sliding 35 percent to 843,500 60-kg bags.
So, with the severity of the fungal outbreak varying by country, no one knows how it will play out during the 2013/2014 season, which begins in October.
"They're going to start harvesting in a month and that's when you start counting the gains or the losses," said Christian Wolthers, of U.S. coffee importer Wolthers America.
"I expect the impact to be ... very noticeable, serious," he said.
(Additional reporting by Marcy Nicholson in New York, Nelson Renteria in San Salvador, Ivan Castro in Managua, and Luc Cohen and David Alire Garcia in Mexico City; Editing by Simon Gardner, Alden Bentley and Bob Burgdorfer)