By Bethany Haye
There’s finally some good news coming out of Colombia in the last couple of weeks. The 2019 harvest of 14.8 million 60kg bags was the best in the last 27 years, due to good weather and higher productivity.
So far this market year (October 2019-January 2020), production reached 5.6 million bags, 13% more than in the same period last year. There was, however, a significant drop in production for the month of January 2020, which weighed in at 1.05 million bags, down 19% from the almost 1.30 million bags produced in January 2019. Exports were also up 6% year on year, at over 13.60 million 60kg bags in MY 2019-20 compared to just short of 12.90 million bags exported in MY 2018-19.
And, on February 19, the federal government announced the allocation of COP218 billion (US$60-64 million with the volatile exchange rate) to compensate for price deficiencies. The new price stabilization fund will be accessible to growers any time the market price falls below production costs. It will be administered by the Ministries of Agriculture and Rural Development, Finance and Public Credit, Industry and Tourism, as well as representatives of coffee growers’ unions and of FNC (National Coffee Confederation).
Originally announced for roll-out in 2017, this response to a complex range of pricing problems includes an additional stabilization mechanism, the possibility of accessing the futures markets. This is to provide certainty that growers will obtain a predetermined price, that when they see a price on a given day, they can secure it six months or a year down the road when the crop is harvested.
Finance Minister Alberto Carrasquilla lauded the initiative, calling it “historical” and stating that “this is the first time we have a stabilization fund, that we have the resources.”
Well, actually, in 2013, the PIC (protection for caficultors’ revenues) fund was set up with a budget of US$350 million on a promise to pay growers a minimum of 1.40/lb. It promptly ran out of money during the first harvest under the program, according to multiple Colombian press reports at the time.
He went on to state that most of the fund’s annual budget would be provided by the government, although growers will also contribute to financing it (as they do with FNC’s guaranteed buy program). Which may lead some smallholders, sinking under the burdens of roya outbreaks, unpredictable weather, and the tanking commodities prices the fund was created to address, to wonder how they’re going to do that. The fund will also solicit contributions from third-party industry actors interested in the sustainability of Colombian coffee farming.
Currently, FNC pays COP930,000 per 125kg load under its guaranteed buy program, which pays above-market price to all Colombian growers. At the end of last year, the Federation calculated production costs for the 125kg load at COP780,000.