While strong production in May sets Colombia’s coffee farmers on course to achieve 2014 targets, unstable global markets and exchange rate concerns continue to loom over the immediate future of the iconic industry, report national media.
Up 12% from the same month last year, robust May production figures exceeding one million bags (132lb each) led experts to project that the industry will finish the year having produced 11.5 million bags in total, approximately 600,000 more than in 2013, reported the national El Espectador newspaper.
According to Luis Genaro Muñoz, general director of the National Federation of Coffee-Growers (FNC), June production may reach as high as 850,000 bags, an encouraging boost for an industry still recovering from a disastrous 2012 plague that devastated small and medium-scale growers in particular.
Catastrophe for some, windfall for others
Colombia’s recent success come on the back of tough times for others.
Colombia’s principal competitors in the market for the highly-valued Arabica coffee bean have been struggling with difficult weather conditions and an aggressive crop fungus. As production falls in Brazil and Central America, the Colombian industry is being asked to meet global demand.
On the other side of the world, constant heavy rain in Indonesia and Vietnam, the second largest producer of coffee in the world, has damaged the production of the eastern ‘Robusta’ brand of coffee.
Biggest monthly price jump since 1994
A prolonged drought in Brazil has dragged up the price of Arabica green beans by its highest margin since 1994, according to international news-wire Reuters. But with the impending threat of an “El Niño” weather spell, which could mean a similarly severe drought in much of Colombia, the country’s farmers are not comforted by the international volatility.
“For now, unstable global markets, a drop in Brazil’s production as a result of prolonged drought and coffee leaf rust in Central America are all factors that concern the guild of coffee farmers,” said Muñoz. He adds that the peso-dollar exchange rate must not be discounted as a threat, referring to the peso’s unhalted appreciation over the last 6 months, and the damage that this could do to Colombian export competitiveness globally.
Industry leaders hope that production is not affected by El Niño, which causes high temperatures and often low precipitation rates, to hit Colombia later this year.
Higher prices doesn’t mean security for farmers
Colombian Federation of Coffee-Growers Communications and Marketing Manager Luis Samper told Colombia Reports earlier this year that, even though the price situation seems to be improving for growers, there is no guarantee that international prices will continue to rise.
Many farmers are still saddled with insoluble debts, and gains from price hikes can be lost in intermediary buyers and exporters.
The country’s smaller coffee producers operated at a heavy loss last year (the first since the 2012 crop losses) and the high price of the peso, low international price of coffee, high costs of fertilizer, and lack of support from the government spurred intense protests at two points during the year.
- ‘Junio, mes de 850 mil sacos de café’ (El Espectador)
- COMMODITIES-Arabica coffee, lean hogs lead February gains (Reuters)
- MONTHLY COFFEE MARKET REPORT (March 2014) (International Coffee Organization)
- How does El Niño affect the climate in Colombia? (Earthzine)