High price boost in Colombian coffee cuts off government subsidies

Posted on Feb 25 2014 - 4:54pm by Editor
Coffee

A significant price boost in Colombian coffee has cut off government aid on Monday for the first time since the subsidy program was launched in 2012, reported international media. Colombian coffee growers have relied on 50% government aid over the past 12 months to compensate for a decline in the market. However the state aid was suspended following a significant surge in the price of arabica coffee beans.

According to international media arabica stock futures saw a rise in Chicago, resulting in a 16-month high of around $1.793 a pound, compared to local rates of $1.233 a pound.

MORE: Colombia coffee production hits 6-year high

“There will not be any subsidy compensated today,” an employer at the farmer-funded Countrywide Espresso Growers Federation told international news agencies.  The representative reported selling prices of between $346.15 per bag and a larger charge of $347.92 in Colombia’s coastal region.

Additionally, the nearly 60% uprise in the market since January 1 has put more cash into grower’s hands. Colombia has seen a 6% decrease in the peso currency, giving Colombian growers a better exchange rate for their exports.

MORE: Colombian peso continues to weaken against US dollar

In comparison to figures on December 16, the government had to pay the maximum amount of $80.52 in support to compensate for the for the missing production profit. The highest price paid in a Colombian region was $201.97.

The suspension of government aid comes at an opportune time as the one trillion peso budget set aside this year might not be adequate to cover the crop, if production rises to around 11.3 million per 132.2-bags as the Coffee Grower’s Federation expects. 

Colombia’s competitor and the world’s top grower of coffee, Brazil, saw a significant decline recently due to several weeks of drought and heat. These circumstances are leaving some fearful that the conditions could be more devastating than the roya fungus that became the scourge of many growers in Central America last year.

The market saw a 65% downfall over the past two and a half years resulting in an unfavorable pattern affecting Colombia, the world’s largest producer of the arabica beans, who subsequently fell below production cost.

If coffee is sold below the $341.60 mark, the aid will automatically resume with the government program subsidizing the missing production profit.

Sources

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