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Colombia coffee chief sees output doubling by 2020

(Reuters) – Colombia, one of the world’s top coffee exporters, could more than double production by the end of the decade if its drive to tap new markets such as Russia and China prove successful, said the head of the coffee federation.

The world’s top producer of high quality arabica beans aims to churn out a record 18 million bags for export by 2020 as it increases crop area and recovers output levels curbed by bad weather, fungus and a tree renovation program, federation chief Luis Genaro Munoz told Reuters.

Coffee output slumped last year to a three decade low of 7.8 million 60-kilogram (132-pound) sacks. The last time Colombia produced close to Munoz’s goal was in 1992 when it reached above 16 million sacks.

Munoz, who expects production next year to hit 9 million sacks, is betting that young, affluent Chinese and Russian consumers will develop a taste for Colombian coffee, bolstering overseas sales that last year reached 7.7 million sacks.

“The day that every Chinese person drinks one cup of coffee a month, we would have no trouble selling 18, or even 20 million sacks,” Munoz said in an interview last week for the Reuters Latin America Summit. “The key is Russia and China.”

Colombia exports most of its beans to the United States and Japan, but the Andean nation has made inroads into China and Russia and shipments to these markets are on the up.

In the first four months of the year China bought about 4,000 sacks of Colombian coffee and is on track to outstrip last year’s total of almost 6,500 sacks. Sales will likely double to $2 million this year, he said.

Colombia sold almost 40,000 sacks to Russia through April, compared with 83,000 during the whole of last year.

Colombia pays between 9 percent and 30 percent import duties to enter China, so “coffee growers are enthusiastic about seeking a free trade accord with China,” Munoz said. Colombia aims to start talks on an agreement with Beijing in June 2013.

“There are opportunities. We have to be intelligent to sell our coffee in niche markets, at prices and in quantities that will be representative of the producer and not flood the market,” he said.

Munoz expects coffee production to remain little changed at under 8 million bags this year and start to pick up in 2013.

“If there are improved conditions in the second half of this year, Colombia has the capacity to reach 9 million sacks without problem,” said Munoz, whose organization represents more than 550,000 coffee farmers.

COFFEE AREA TO EXPAND

The weather could be a major hurdle for Colombia’s plans to boost coffee output. Torrential rains have prevented crucial sunlight from reaching plants and affected flowering, adding a third consecutive year of missed production goals.

Too much rain damages key flowering stages, knocks beans off trees and washes away roads that are the only way the product can get to ports.

Low availability of high quality beans such as those produced in Colombia has helped boost global arabica prices and pushed the nation down to fifth place on the list of world producers, behind Brazil, Vietnam, Indonesia and Ethiopia.

Arabica coffee futures trading on ICE have fallen roughly 45 percent in the past year, after soaring above $3 per lb in May 2011. The market dropped as speculators left and on the expectation for a bumper crop from top coffee grower Brazil.

About a third of the 900,000 hectares (about 222,000 acres) planted with coffee in Colombia are being renovated and therefore currently unused.

Munoz is confident that in about four years, once most trees enter into full production, Colombia will be able to harvest 11 million bags regardless of La Nina or El Nino – the weather phenomena causing drought then heavy rains.

“The renovation program coincided with the most terrible weather, but the new production will start to come on line soon and at some point it has to stop raining, so statistically you have to assume it will come together and output will increase,” said Craig Holt, founder of Atlas Coffee Importers in Seattle.

“And once China opens up to high end coffee, that’s a huge amount of coffee.”

Colombian farmers renovated 117,000 hectares with roya-resistant varieties of trees last year, and a similar amount is planned for 2012.

Fungus-resistant coffee trees have helped bring down the area affected by roya to about 12 percent from more than 30 percent a few years ago, and that should come down to single digits this year, Munoz has said.

With new planting areas coming online in the next several years – such as Putumayo, one of Colombia’s regions that has been most damaged by war and drug trafficking – Munoz expects cultivation to reach a record 1 million hectares.

The thirst for Colombian coffee is still strong in existing markets including Europe, said Munoz, where cash-strapped consumers are cutting back on luxury foods and beverages.

“They would sell the car, or delay buying one; but a good cup of coffee is the last thing to go.”

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Written by Rico

Rico

"Rico" is the crazy mind behind the Q media websites, a series of onlinemagazines that includes TodayColombia.com. Rico brings his special kind of savvy to online marketing. His websites are engaging, provocative, informative and sometimes off the wall, where you either like or you leave it. The same goes for him, like him or leave him.There is no middle ground. No compromises, only a passion to present reality as he sees it!