After Colombia’s disease-tortured coffee crop spurred buyers to turn to other regions, the Andean country known for its top quality Arabica exports is once again winning back its old clients.
“The market is just beginning to come around,” Director of the National Association of Coffee Exporters of Colombia Carlos Ignacio Rojas told local reporters.
“And although many customers looked for other destinations for buying – like Peru, Guatemala and Costa Rica – to compensate for Colombia’s scarcity, it has not been difficult to regain customers.”
The 19% lift in Colombia coffee exports over the past twelve months is a breath of fresh air for an industry that was brought to its knees toward the end of 2012. That is when low crop output brought about by rust disease converged with a fall in global prices, which in turn forced incomes to fall below the standard costs of production for Colombia’s coffee farmers.
Even though Rojas is optimistic about Colombia’s exports returning to normal, price trends and likely strikes still paint a rather grave picture for the industry.
Arabica’s price on London’s commodities markets, says Bloomberg, fell 15% as Brazil’s 48.6 million bag harvest caused supply to outstrip demand. Colombia’s strong peso does not help coffee growers’ competitiveness either. The Colombian currency rallied to 1,865 pesos to the dollar, the highest it has been in the last three months, according to the Wall St. Journal.
The price of robusta coffee reached a two week high last week, reported Bloomberg. Robusta, however, has been relatively stable on the markets over the past year. Considered a higher production, lower quality crop, Colombia does not grow much of it in favor of the higher quality Arabica.
And beyond the possibility of a price rebound, coffee farmers are still angry over their plight. In response to what they consider the government’s broken promises, they have planned to execute an industry-wide strike on August 19th. And they have not called it off after repeated pleas for open dialogue with the government.
Strikes in the Colombian coffee business are in fashion this year. In February, growers closed roads in protest of the government’s under-subsidizing of the flailing flagship industry. The reason coffee growers are reigniting the strikes, they say, is because the subsidy deal the government shook on in following the strikes has fallen apart.
MORE: Colombia’s coffee farmers and ‘other sectors’ announce new strikes
The original deal between coffee growers and the Santos-led government was to establish a $443 million fund called the Coffee Income Protection Program (PIC). That fund would distribute income subsidies to individual farmers.
MORE: No more financial support for coffee farmers: Finance Minister
The government has claimed that it has fulfilled its promise by dedicating a generous sum to the fund. But coffee grower representatives say the quantity of funds is not the issue. Growers have declared that the program for delivering subsidies to small and medium-sized growers is flawed and even though the subsidies are there, the money is not making it to the growers that need it.
According to local media, Luis Genaro Muñoz, leader of the National Federation of Coffee growers (FNC) reportedly rejected the August strikes, calling for “sanity and reason” in the minds of the coffee growers. He added that the government and the FNC are open to dialogue.
The FNC was not available for immediate comment.
Colombia’s coffee sector could be making a turn around. If the leaders of the coffee growers support fund figure out a way to deliver subsidies so that farmers are satisfied, the farmers say they will not carry out the strike. That is a good sign for President Juan Manuel Santos, who is likely to face another election in less than a year.
Yet any gains in stability within the coffee industry could still be equalized by an economy strangled by Colombia’s growing wave of strikes. Over the last quarter in 2012 and the first quarter in 2013 Bogota-based think tank ANIF calculated that the costs of strikes have put the economy back by roughly $470 million.
Sources
- Clientes vuelvan al cafe Colombiano tras la recuperacion de produccion (La Republica)
- Federacion Nacional de Cafeteros rechazo paro agrario del 19 Agosto (W Radio)
- Robusta coffee rises to 2 week high on stockpiles, cocoa falls (Bloomberg)
- Colombia Peso hits 3-month high on dollar-rally doubts (Wall St. Journal)
- Costo economico de los paros y descarrilamiento institucional de Colombia (ANIF)