Despite declines in production caused by Hurricane Mitch, agriculture continues to dominate the Honduran economy, supplying in 1999 over 60 percent of the jobs and over half of all merchandise export earnings. That year, out of a working population of 2.13 million people, 834,900 of them held agricultural jobs. Coffee and bananas have traditionally made up the bulk of Honduras's agricultural exports.
Coffee is produced in 14 of the country's 18 provinces by 70,000 independent producers. Over the last decade, the coffee industry has been beset by financial problems. Some of these problems have resulted from poor weather. In 1998, prior to Hurricane Mitch, Honduras was the tenth largest coffee producer in the world. The damage caused by Hurricane Mitch contributed to an 11 percent decline in coffee production in 1999. Other problems came as a result of the structure of the industry itself. With so many small producers, quality control was hard to maintain. This caused great price volatility and made revenues less dependable. Furthermore, many small coffee producers and exporters took out loans before the hurricane, putting them in debt to the Central Bank following the destruction of their crops. Government subsidies to assist coffee farmers have been slow in coming, adding to the coffee industry's problems.
Banana production, which takes place on the northern coast, is controlled primarily by the subsidiaries of 2 U.S. conglomerates, Chiquita and Dole. These companies have established effective monopolies over the banana export trade in Honduras. However, legal challenges to the monopolies are growing more frequent.
Like the coffee sector, the banana sector had its share of trouble in the 1990s. Between 1991 and 1994, production was affected by strikes and floods. The industry recovered in 1995, but was then devastated in 1998 when Hurricane Mitch destroyed a majority of the banana plantations. In 1999, production fell by over 70 percent. Banana exports are not expected to reach pre-hurricane levels until 2001 or 2002. A reduction in the banana export tax from 50 U.S. cents per box to 4 cents will likely help boost the recovery.
With bananas and coffee proving highly susceptible to price volatility, bad weather, and labor unrest, Honduras has made efforts to diversify its agricultural exports. The development of nontraditional crops such as melon, pineapple, sugarcane, and African palm has expanded since the mid-1990s. Between 1995 and 1999, African palm production rose 50 percent. Sugar production during the same period increased from 67.5 million bags, to 82.8 million bags, reaching a high in 1998 of 89.4 million bags. In the wake of the hurricane, the pace of diversification increased with many banana farmers turning over some of their fields to the production of non-traditional crops.
During the 1990s commercial shrimp farming emerged as one of Honduras's most dynamic industries, posting steady gains in production and revenue between 1995 and 1998. Volume and earnings fell slightly in 1999 after Hurricane Mitch, but the industry quickly recovered. Shrimp is the third most important agricultural export after bananas and coffee, generating revenues of US$153 million in 1999.