Price of Colombian coffee hits 2 year high

Posted on Mar 4 2014 - 3:43pm by Rico
Sacks of Colombian coffee

Colombian coffee is again selling at $2 a pound, as international coffee prices were the highest since July 2012, said the International Coffee Organization (ICO) on Tuesday.

The rapid price rise in coffee, which began two weeks ago, stems from speculation by the international market that drought in Brazil – the world’s largest coffee producer — and plant disease in Central America will affect this year’s overall production of the arabica coffee bean.

MORE: Brazil coffee production falls, Colombia internal coffee price rises

Until recently, Colombian coffee farmers have been facing decreasing international prices and the ongoing issue of leaf rust, a plant disease that ravaged the usually high-quality arabica crops. This has prompted many producers to take the costly step of renewing their plantations with disease resistant crops.

With the internal price of coffee now hovering at around $400 per load coffee growers are only just beginning to see a small profit margin in the commodity, which was sold at a 40% to 50% loss towards the end of last year.

However, this latest price increase cannot, for the moment, be enjoyed by the majority of coffee growers in Colombia’s important Eje Cafetero coffee region. They currently have little to sell and have to wait for the next harvest, set to begin later in March and April.

As the harvest begins, the farmers will hope that prices will increase even further or at least remain steady for the remainder of the year.

Decrease in Central America’s Coffee Production

In addition to speculation over Brazil’s 2014 production, there have also been production shortfalls this year in Honduras, Guatemala, Nicaragua, Costa Rica and El Salvador.

According to the ICO, the ongoing outbreak of coffee leaf rust has seen production in Honduras down to 4.2 million bags, Mexico down to 3.9 million and Guatemala to 3.1 million. This highlights a decrease of 600,000 bags produced on average, for each nation respectively.

Carlos Ignacio Rojas, president of the National Association of Coffee Exporters (Asoexport), told Colombia’s Portafolio magazine that he considered this shortage “relative” because the supply of coffee is not enough to meet demand.
“Restoring production in Central America will be a difficult task that will require at least three years,” Rojas said.

Subsidized

In recent years, following protests and negotiations, Colombia’s coffee industry is currently receiving $443 million in government aid to help farmers cope with the fall-out from a plant disease that ravaged Colombia’s high quality arabica crops.

MORE: High price boost in Colombian coffee cuts off government subsidies

Colombian coffee growers have relied on 50% government aid over the past 12 months, but the the state aid was suspended last week.

Colombia’s coffee exports accounted for $1.9 billion in 2012, which also accounts for 0.5% of Colombia’s $336.3 billion GDP.

Sources

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