Colombian Government Agrees on Activation of Coffee Price Stabilization Fund
Colombian Government Agrees on Activation of Coffee Price Stabilization Fund
Bogota (Coffee Network)- Colombian Minister of Agriculture announced the activation of the Coffee price stabilization fund, a highly awaited announcement as coffee growers claimed they were producing at a loss as internal coffee prices were for a long-time below production costs.
Although the minister did not say which mechanism will activate the coffee price stabilization fund, he said coffee growers will have a compensation of up to 80% of costs that will be progressive and differentiated according to the socioeconomic characteristics of the coffee growers.
“Our proposal is that 80% of compensation be paid, which is the maximum allowed by law. That is, Colombian coffee growers will be paid the maximum amount allowed. We are committed to coffee growers at this time who have suffered economic losses,” explained minister of agriculture Jhenifer Mojica.
Oscar Gutierrez, director of coffee dignity, told Coffee Network, the mechanism to active the fund will be announced on Friday when the committee of the coffee growers federation will meet.
She stated that to reach this decision, the data collected in the technical analyzes were considered, which showed effects due to a drop in prices, an increase in production costs and the effects of the El Niño phenomenon.
“Therefore, our proposal is that all of the resources available to the Fund be used to compensate for these losses. That 80% compensation they will have is based on the value of the cargo,” Mojica explained.
The regulation will also determine whether the price stabilization fund will create hedging mechanisms or if the producer will ensure a minimum price when coffee prices are low. Consequently, the regulation will also set a benchmark price that triggers the potential bailout. Such price most likely will be one set by think tank CRECE, which identified that production costs for two bags of parchment coffee of 125kg ranges around 1.2 million pesos, while the reference price for two bags of 125kg of parchment coffee is being paid at COP2 million. As a result, coffee growers right now are receiving more funds than production costs.
Coffee growers are allocating USD $0.5 cents per pound exported as part of the so-called coffee contribution to feed the stabilization fund.
The coffee stabilization fund created in 2019 currently has COP330 billion Colombian pesos ($82.7 billion).
Petro and coffee
In a bid to weaken the coffee growers federation, Colombian president Gustavo Petro is holding a meeting with coffee growers in Bogota yesterday and today, a meeting where officials of the coffee growers federation (FNC) were not invited.
Petro reiterated that the management of the national coffee fund, a parafiscal fund administered by the coffee growers federation is not properly managed.
Petro hinted as he has said in the past that he wants to regain the management of the national coffee fund.
“What happens to that public money? Why don't we protect public property? The coffee money belongs to the Colombian people. There can be no doubt about that,” he stated before the representatives of different coffee growing associations from different departments of the country.
For this reason, he invited the coffee growing union to agree on measures to "rescue" the sector and said that a coffee constituent project must be launched.
“What do we do with the National Coffee Fund? There is money, but how is it being used? We have a right to that money. But the thesis has been created that there are other rights acquired by private parties,” he noted.
In August, Petro said he aims to restructure the National Coffee Federation, and after issuing an ultimatum to withdraw the shared contract with the National Coffee Fund.
Petro said the Coffee Growers Federation (FNC) must be restructured, and if this restructuring does not materialize, he would withdraw the shared contract with the National Coffee Fund.
The coffee growers federation said Petro is wrong by claiming that the funds of the coffee fund belong the people. FNC said they belong to the coffee growers.
“The national coffee fund is a parafical account, therefore its resources have a specific allocation for those who contribute to these funds, that is, they are resources that the coffee growers pay for themselves. They are not part of the budget of the nation,” FNC said noting that coffee growers pay 0.6 cents of a dollar per coffee pound of exported coffee
By Diana Delgado
