The battle for coffee

The coffee market is agitated. For one pound of Colombian coffee, international buyers are paying 2,25 dollars, a price that hadn’t been seen in over a decade.

This particular event has made some very happy, but others resent the fact. Not everything in life is perfect, and this situation is no exception. The excellent price can’t be enjoyed by everyone because there isn’t enough coffee to sell.

The increase in the price has occurred precisely because of its shortage. In the first trimester of the year, the external sales increased up to 3,1 million bags, with a decrease of the 21 per cent compared to the same period last year.

In the market, buyers are literally fighting over the last grain of coffee to fulfill their contracts with costumers. For internal consumption, Colombia has been forced to import coffee in order to leave the national production for the international market.

In the coffee trade, rumors about big losses suffered by those who were over confident and sold in advance come and go.

In order to fulfill industry commitments, some have had to take on high costs to get Colombian coffee. Who? Hard to tell. As an experienced exporter stated, in this business all the players keep their cards to themselves and as well as no one boasts of its earnings, nor do they reveal their losses.

Chief Executive of Colombian Coffee Federation Gabriel Silva says that the producers have satisfied their clients, and Asoexport, Colombian Asociation of Exportation, director Jorge Lozano asserts that the exporters did as well. In this business the golden rule is to keep ones word.

But some private exporters aren’t quite happy with the Colombian Coffee Federation about the production projections that were made. Chairman of the board of directors of Asoexport, Mauricio Bernal, declared that some exporters made their commitments based on the data that was given by the Federation. According to them, “not admitting on time that the production dropped generated a huge surprise both in the domestic market and for Colombian coffee buyers abroad”.

Juan Camilo Restrepo, member of the national Coffee makers committee, explains that the Federation doesn’t make official projections. “For domestic use, crop estimatives are done, but anyone who did a bad business from those studies can’t blame the Federation”. Furthermore, winter 2008 exceeded all odds and deeply affected the crop.
On the other side, the growers are smiling, especially the ones that in this moment still have product to sell. They are being paid almost double of the price paid last year (9000,000 pesos/load).

How will the harvest be this year? The Federation estimates that between 10 and 11,5 million bags, but some experts believe that it will be below that. Truth is that it will be nothing like 2007 production, which registered a record with 12,6 million bags.

Among other reasons, because the required plan to renovate the coffee plantations that Colombia launched several years ago has taken out of production a little over one quarter of the acreage (260,000 hectares are in this program out of 800,000 form Colombia’s total plantations). Everyone knows the importance of changing old coffee plants for new ones. Another issue is that the stock lists are very low (600,000 bags).

This responds to the global growing demand of Colombian coffee and the growth in domestic consumption. In addition, the industry has suffered a change by exporting processed coffee (not only the green one), that has higher added value, and this has contributed to reduce the bean reserves.

How long will this complex juncture of high prices and no coffee last? The experts believe that not for long. When the big crop of the second semester comes out, the Colombian coffee price will decrease and, apparently, this will be a good thing for stabilization of the coffee trade business.
 
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