Opportunity and trouble brewing

Colombia wrestles with surging international coffee prices.

In early July 2021, Colombia registered an all-time high internal coffee price of COP 1,562,741 per 125 kg. which marked a significant increase from the June 2021 COP 1,428,00 per 125 kg. As of 26 July, the price had continued to climb, reaching COP 1,905,000 per 125 kg. The record prices have been caused by a range of factors: droughts and frosts in Brazil, COP devaluing against USD, protests and blockades in Colombia, COVID-19 restrictions hitting production and a global shortage of shipping containers.

An agronomist and coffee trade specialist explains the reality of the coffee market, “The coffee trade in Colombia is largely governed by what happens in Brazil, especially if it is Arabic coffee beans. The country has a biannual production – one year very large, the next small – this makes it very challenging to predict coffee prices.”

“The coffee trade in Colombia is largely governed by what happens in Brazil, especially if it is Arabic coffee beans.”

Agronomist and coffee trade specialist, Colombia

In addition to the Brazilian climate, global prices rose after the outbreak of the COVID-19 pandemic due to logistic restrictions which also led to a significant decrease in global coffee stocks. As a result, global coffee prices have registered a 60% increase since January.

The agronomist points out that specialty coffee businesses are starting to suffer, “The situation so far has mainly benefited the producer, but the production chain that is being affected is that of specialty coffees. As prices rise, consumption decreases, and specialty coffees really suffer.”

In Colombia, these logistics bottlenecks have been aggravated by social unrest. Police violence and the resulting anti-government protests have led to road blockades that have prevented the passage of coffee and other commodities. In this context, the port of Buenaventura on the Pacific Ocean, from which 60% of Colombian coffee is exported, was blocked for 40 days in April and May. As a result, Colombian coffee exports fell by 52% in May 2020.

A Colombia coffee trader confirmed, “The strikes affected shipments of coffee that Colombia had agreed to deliver to customers abroad. In the month of strikes, between 600,000 and 700,000 bags were stopped from being dispatched.”

“The strikes affected the deliveries of coffee that Colombia had agreed to deliver to customers abroad. In the month of strikes, between 600,000 and 700,000 bags were stopped from being dispatched.”

Coffee trader, Colombia

The National Federation of Coffee Growers of Colombia affirmed that Colombian producers lost international clients as a result of the unreliable logistics in Colombia. Nevertheless, the weather conditions in Brazil, which has suffered unprecedented droughts and frosts that have destroyed crops throughout the country, offered a new lifeline for Colombian producers who, on average, export 80% of their total production.

As economies reopen and world coffee demand soars, prices of soft commodities are expected to stay high after almost a decade of crisis. Since 2001, some coffee producers in Latin America have been working at a loss, a trend that may be on the verge of changing. The coffee trader warns, “Producers in Colombia need to learn to save for times of ‘lean cows’, because the high coffee price will not stay forever and when it falls they will not be ready.”

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