Rich roast

Coffee prices continue to climb creating winners and losers.

We’re back for another hit of caffeine, as the cost of coffee beans has soared in 2021, causing roasters to raise 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 record of COP 1,428,00 per 125 kg.

A commodities trader in Colombia commented, “The price is unbelievable, but it’s a reality and it is happening on the New York Stock Exchange. The beneficiaries are the coffee growers, but those who buy coffee and process it are suffering. Right now, regular coffee is selling for the same price as specialty coffee.”

“The beneficiaries are the coffee growers, but those who buy coffee and process it are suffering. Right now, regular coffee is selling for the same price as specialty coffee.”

Commodities trader, Colombia

A Colombian coffee grower begged to differ, “The problem is that the production costs also increase but when the coffee price falls the costs remain. For example, fertiliser suppliers have increased their prices by 80% and labour is also more expensive. Higher prices don’t automatically turn into higher profits.”

Extreme weather in Brazil has damaged coffee crops. Severe droughts and plunging temperatures in unexpected areas of the country has caused a 4% loss of crop production, which will benefit other exporting countries like Colombia. In this context, Colombia is aiming to increase the quality of its product: improving quality control laboratories and processing facilities, and engaging marketing experts to provide better solutions to exporters.

A Brazilian agronomist confirmed, “Frosts in Brazil have happened before, because the coffee zone was located where frosts were frequent, but the coffee growers moved to avoid the frosts but the frosts are following them! What is happening now is exceptional.”

“The coffee growers [in Brazil] moved to avoid the frosts but the frosts are following them! What is happening now is exceptional.”

Agronomist, Brazil

It’s not just the weather though, the COP is highly devalued against USD, the trader explained, “The weakness of the COP is part of the problem in Colombia, but not in other countries. For example, Ecuador, although it may be affected by what is happening in Brazil, it is dollarised so there is no dual impact.”

According to the National Federation of Coffee Producers of Colombia (“FNC”), grains of high quality will boost the profitability of Colombian coffee exports this year, but the extreme weather conditions that affected Brazil could also impact Colombia. As a recent warning, in the first quarter of 2021, heavy rains in Colombia reduced production levels, highlighting the climate risks facing the industry.

The FNC reported that coffee production from January to August 2021 in Colombia exceeded 7.8 million, 8% down from 8.5 million achieved during the same period of 2020. In the last 12 months production also fell 7%. In addition to heavy rains, production levels were impacted by strikes and infrastructure blockades caused by social unrest in the country.

There are still opportunities for growth though, the FNC also highlighted the importance of domestic consumption for the renovation of the coffee production market as a strategic economic sector for the country. The Colombian commodities trader agreed, “Colombia’s coffee consumption is very low at 2 kg/capita compared to 5.6 kg/capita in Brazil and 12 kg/capita in Finland. There is room for significant growth there.”

Furthermore, the export of green coffee beans to Asian countries has grown in recent years, the agronomist explained, “China and Korea are increasingly looking for green grain and they are in charge of transforming it. In fact, what Colombia exports most today is green coffee beans, not finished products.”

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