Colombian coffee farmers have gone on strike. Among the top producers of high quality arabica beans, they are demanding help from Bogotá, in a sign of the strain that a 55 per cent drop in prices over the past two years is inflicting on the coffee industry.
The fall in prices is adding to the woes of local producers, along with the steep appreciation of the local currency and a record-breaking crop forecast in neighbouring Brazil.
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Arabica prices have plunged in the past 18 months and are fluctuating around $1.40 per pound. That compares with the unusually high 2011 average of about $2.55 a pound, and $1.76 a pound last year.
“All of us coffee growers would like to live in an ideal world with sustainable prices,” said Luis Genaro Muñoz, general manager of the Colombian Coffee Growers Federation, which represents some 500,000 coffee farming families.
Colombia is the world’s largest producer of premium quality semi-washed arabica beans, the variety sought after by espresso connoisseurs for its mild flavour.
The strike shows that Colombian producers, who often set trends for the wider industry in Latin America, are struggling even if prices remain much higher than in previous downturns. Arabica coffee prices have fallen 55 per cent from a 30-year peak in 2011 of more than $3 a pound, but remain well above the low of $0.50 set in 2002. Higher production costs are a further problem.
Notwithstanding difficulties in the sector, Juan Manuel Santos, Colombia’s president, said the strike was “unfair, inconvenient and unnecessary” because credits and subsidies, amounting to more than $1.6bn, have already been disbursed. However, local coffee producers complained that the government’s help was still insufficient as they are paid more than $290 for a “load” of coffee of 125kg – including a government subsidy of $33 – while the cost of production hovers around $350.
“Price is definitely an issue,” said Omar Orozco, a coffee producer from Manizales. Moreover, coffee growers are suffering a cut in income because the peso, the local currency, has strengthened against the US dollar.
In the past decade Colombia has been reaping the benefits of high commodity prices, macroeconomic credibility, and an improved security situation.
But those same trends have hit coffee exporters by contributing to the strengthening of the trade-weighted peso, which is 17 per cent above its 10-year average.
Adding to the mix, the size of the crop has declined in recent years. After an outbreak of a leaf rust devastated Colombia’s production five years ago, the country introduced a bush resistant to fungus to improve production.
This month, the Colombian government and the Coffee Growers Federation announced they would extend a farmers income support programme until July to sustain the coffee plantation conversion process. So far, they have replanted about 25 per cent of the country’s coffee-producing acreage, and production has shown some signs of improvement.