There are 550,000 farmers, many of them peasants associated in 33 cooperatives, who are taking advantage of the surge in coffee prices that have not been seen for two years.
Since August 7, and until now, the price of a 125-kilogram load of coffee has exceeded $2 million and on the New York Stock Exchange its price is USD 2.59 per pound, something that has not been seen for two years. Coffee growers are having a field day.
There are 550,000 families, many of them small producers with less than 2 hectares, others with medium-sized producers between 2 and 7 hectares, and the large ones with more than that. The new prices improve their income and give them a respite in the midst of the turbulence of recent years, which has combined low international prices, the impasse of futures contracts, slow crop renewal, smaller planted area and imports of inferior quality coffee for domestic consumption.
The purchase guarantee for the harvest is provided by 33 cooperatives with 77,000 members. In the largest by volume, the one in Cauca, its manager Edgar Meneses, contrasts the good prices with the high costs for his 3,200 members from 24 coffee-growing municipalities in the department. This year Caficauca expects a volume of between 28 and 30 million kilos, 98% of which will be differentiated. 70% will go to the National Federation of Coffee Growers (FNC), 20% to Expocafé, and 10% to private exporters.
The managers of Caficauca and Cadefihuila, the largest coffee cooperatives in the country
In Huila, the country’s leading coffee producer for the past 12 years, Fernando Vargas in Cadefihuila with his 3,600 members from the north, west and south of the department where Pitalito is located, the coffee-producing municipality with the largest production in the country, hope to make up for the first half of the year, which was hit by the summer, and achieve a second half of the year with greater production and quality thanks to the fertilization they carried out. The 60-year-old cooperative projects 20 million kilos, 30% of which will be sold to the FNC, 5% for export and 65% will go to other clients. The third of the large cooperatives is in Manizales, where Carlos Andrés Jaramillo Rozo brings together 3,600 growers from the center and east of Caldes and has its headquarters in Chinchiná, where the coffee research center is located.
Read also: Key families in the coffee boom in Huila
Until when will the good prices last?
It is difficult to predict that the domestic price will remain at $2 million and that the Colombian C contract on the New York Stock Exchange will remain at current levels. The facts that push the price up may give some clues. The first is the climate, traditionally responsible for “bonanzas” such as the one in 1975 when coffee reached USD 3/lb in New York. This time it all started in Vietnam and Indonesia a month ago when the shortage of their robusta variety coffee became evident, forcing buyers to look among Arabica coffee producers, such as Colombia, for the highest quality coffee that is preferred by major brands such as Nespresso, Nestlé and Juan Valdez.
In Brazil, the world’s largest producer, the drought that threatens next year’s production has been compounded by low temperatures that appeared at the beginning of August in the form of light frosts that caused nervousness in the volatile coffee market, which was preparing for a new wave of cold before the end of the month, in the southern states of Rio Grande do Sul, Santa Catarina and Paraná.
Bypassing the Suez and queuing in Panama
The international price has not only risen due to climate reasons. Logistics is key in costs and risks. The Panama Canal and the Suez Canal have presented problems for the coffee business. In the Panama Canal The prolonged drought that affected the levels of Gatun and Alhajuela lakes increased waiting times. From September 1, there will be an additional transit quota for a total of 36 daily reservation slots.
In the Suez Canal, the war between Israel and Gaza has caused delays and diversions of cargo after attacks in the Red Sea. Last month Maersk, one of the world’s largest shipping companies, said most of them had to go around the Cape of Good Hope in Africa.to avoid the conflict, which inevitably increases the shipping time by a few weeks, additional insurance payments and extra fees.
Just as important, if not more so, than the climate and logistics is the pressure on the market caused by the new European Union anti-deforestation law that came into force on January 1, which requires companies to verify that products such as coffee have not been produced in areas resulting from the destruction of forests. This is not the case with Colombian coffee growing, but it still has to comply with requirements such as the geographic coordinates of the lots that will be delivered to the member states so that they can carry out the inspection through a digital system. The sanctions are “dissuasive” with fines of 4% of the total annual turnover in the EU of the trader who does not comply.
Vargas points out that both Cadefihuila and the other FNC producers have responded with the required information, and that Colombia will not have any problems. However, there are many more EU suppliers that must comply with the new law and market experts say that European importers are now trying to adjust stocks to avoid any shortages next year.
The rest are speculators, of which there is no shortage.
Good news on time
The dollar, which has been exceeding $4,000 since June 12, joins the good news 40 days before the start of the second-half harvest, which for growers in the former Coffee Axis of the departments of Quindío, Caldas and Risaralda, is the largest of 2024. Meanwhile, in the new Coffee Axis of Huila, Tolima, Cauca and Nariño, the mitaca or traviesa harvest will be harvested, with a lower production than that obtained in the first part of the year.
Production has increased. In the first half of the year, there were 5.2 million bags, 16% more than in the same months last year. In the full year, figures were again seen that had not appeared since 2021: 12.14 million bags, with increases of 16%. Exports, for their part, grew 15% and totaled 5.74 million bags in the first 6 months.
See also: What is Petro’s problem with the Federation of Coffee Growers that does not allow him to work with this
Coffee has regained its social role in Colombia thanks to specials and new preparations
That red coffee is more expensive is another story, because, as in other cases, the marketing companies will try to hold out before passing on the costs and even more so now that coffee consumption is growing in the country, resuming a social role that it had lost, driven by the boom in specialty coffees with more than 2,000 stores and new preparations, according to Euromonitor.
For now, we can only follow the development of the volatile coffee market and the prices that have encouraged optimism even from the Finance Minister Bonilla.
Read also:Goal of the manager of the Federation of Coffee Growers: having Sofia Vergara as a partner with a new coffee brand
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