Colombian coffee remains in trouble as February arabica coffee prices have hit a three-year low despite a leaf rust crisis threatening crops in Central America.
February arabica coffee prices plummeted to $1.63 per pound in the United States, according to data from the International Coffee Organization (ICO), while the ICO’s head of operations Mauricio Galindo told Colombia Reports that the inventories of stockpiled arabica beans are at the highest levels recorded since 2010.
Coffee prices recovered slightly in mid-January due to concerns of an outbreak of leaf rust in Central America, but as of February 11, prices were the lowest since 2010. The price tempering of Colombian coffee is in part due to Brazil’s record-breaking crop forecast which stems from the abundance of rainfall in the country’s coffee-growing regions.
All major coffee-producing countries in Central America reported “some extent of damage” due to leaf rust. Reports from Guatemala and El Salvador state that rust affected 40% to 50% of all coffee plants. However, it is still “too early to have a guess” as to whether the prices for Colombian coffee will experience a positive effect, according to Galindo.
Colombia, whose coffee crop was devastated by leaf rust between 2008 and 2012, has since introduced a bush resistant to rust and should be fairly safe from the disease. Crop production is expected to increase close to 30% in 2013 according to Bloomberg, which may decrease demand for arabica even more. Meanwhile, demand for lower quality robusta beans hit a four-month high in February.
“To see a reversal of this trend, we would have to see a reduction in arbitrage (the difference between London and New York prices),” said Galindo. “There was an increase in arbitrage of over a dollar a few years ago (during the crisis), and now it is down around 50 cents, but even then they are not ready to start buying arabica.”
This limp demand is in part due to roasters using more robusta beans during the Colombian coffee crisis and not seeing a need to change when the more expensive arabica beans became more readily available.
Much of Colombia’s trouble stems from Brazil which “is not only coming out with a big crop,” according to the ICO official, “but Brazilian farmers withheld coffee from their big crop last year. The price went down and now the new crop is coming and everyone knows that they still have lots of coffee. This is putting [more] downward pressure on the markets.”
Although the quality of Brazilian beans is not as good as Colombia’s, “the volume is huge,” said Galindo. “And increasingly roasters are willing to use Brazilian naturals rather than Colombian milds in their blends, so we are seeing a change in trends and tastes,” which is not good for the price of Colombian coffee.
