28.02.2018

Colombia Calls Coffee-Producing Nations To Retain 5% Of Beans To Boost International Prices

Colombia Calls Coffee-Producing Nations To Retain 5% Of Beans To Boost International Prices

COFFEENETWORK (Bogota) –The Colombia’s coffee growers federation ( Fedecafé) has called coffee-producing nations to retain 5% of their annual output in a bid to boost coffee prices, Roberto Velez, general manager of Fedecafé said today.

“This proposal to leading coffee- producing nations would balance supply and demand of coffee, given the large supply of Brazil,” Velez said during a press conference held in Bogotá.

If producing nations commit to retain 5% of their output, 7.5 million 60-kg bags will be withdrawn from the supply.

Velez said coffee-producing nations will meet once again in Mexico to host the new forum in 2019 where growers and roasters should try to improve the growers’ income to guarantee the sustainability of the industry.

Low international coffee prices, which are ranging around $1.20 / per pound and the appreciation of the Colombian peso, are eating into margins for growers.

Production costs of Colombian bean growers range between 700,000 pesos ( $244) for two bags of parchment coffee, and 750,000 pesos ($262), while internal coffee prices traded at 729,000 for the same two bags yesterday.

Fedecafé has called the Colombian central bank to intervene the spot foreign exchange market by buying dollars from the market in a bid to weaken the peso, and bring it back to 3,000 pesos to the dollar.

The Colombian peso has appreciated five percent since the beginning of 2017 to trade at 2,849.90 yesterday, strengthening from 3,000 pesos to the dollar at the beginning of 2017.

“We must keep working with the government to take actions to bring back the competitiveness to the agricultural sector. The agricultural sector cannot be on their knees every time the peso strengthens,” he said.

The peso has gained in value driven by rising oil prices. Colombia’s economy is highly dependent on oil revenues, and a fluctuation in petrol prices has a direct effect on the local currency.

But the competitiveness of growers cannot fully depend on the exchange rate. As a result, Velez encouraged growers to be more innovative, and produce value-added coffee sub-products, which can generate higher incomes.

For instance, some 40% of Colombian growers receive a higher income than the internal reference price because they produce specialty beans. Others have invented tea bags based on coffee residues.

To propel coffee prices, Fedecafé has also called coffee-producing nations to increase their national intake of beans. He cited Peru, a nation that produces more than 4 million 60-kg bags but consumes locally only 300,000 bags. Higher local consumption of beans will also reduce the surplus of beans in the international market.

Colombia consumes 1.8 million 60-kg bags, but produces around 14 million 60-kg bags.

Cola companies like Coca-Cola or Pepsi could also launch beverages based on coffee to offer to the market healthier beverages, potentially boosting demand for beans.

Writing by Diana Delgado