Coffee Network (Bogota)- The International Coffee Organization (ICO) signed an agreement in Bogota that redefines the internal system for calculating votes and paying the economic contribution, in which large roasters and private companies will pay proportionate to bean transactions, Vanusia Nogueira, ICO’s executive director said.
Companies like Switzerland-giant food company Nestle will pay more to ICO as they handle increased amounts of bean transactions, Nogueira told Coffee Network in an interview over the weekend.
“Votes and payments will be proportional to the physical volume of grains,” Nogueira said. ” Switzerland today buys a lot of coffee as it prepares capsules that sell them with a higher turnover than many producing countries,” she added.
As a result of the modification, coffee- producing nations will weight 47% to the ICO’s economic contributions, while importers including roasters will contribute with 53%. Until now the proportion was 50%-50%.
ICO's increased funds will be used to create coffee research centers in producing nations with the priority of inventing varietals that withstand more rainfall as climate change is here to stay, she said. Coffee research centers like the Colombian one Cenicafe will be replicated throughout coffee-producing nations. Funds will also be earmarked to promote diversification of plantations at farms and carbon capture to sell certificates of CO2 emission reduction. Funds will also be invested in educating growers to implement practices to increase productivity at farms.
“We must help growers on climate change. Unfortunately, climate change is here to stay,” she added.
Funds will also be earmarked to better assess coffee consumption in producing and consuming nations. The lack of transparent information on consumption throughout the world it makes more difficult to properly assess global coffee statistics, analysts have stressed.
Markets
A devastating hairstorm in the Brazilian coffee producing province of Minas Gerais last week brings uncertainty to the coffee market as the hailstorm knocked down the flowers of an excellent flowering registered in the last week of September, Nogueira said.
“Everyone thought that Brazilian production for 2023 was going to be big, but again the hailstorm of last week devastated entire plantations…knocking down the flowers. We must wait to see if we register another flowering at the beginning of November,” she added, noting that an excellent flowering had been registered in Brazil in the last week of September.
Coffee, beans, vegetables, and fruit plantations (citrus, nectarine, peach, plum and avocado were mostly hit by hailstorm in the state of Minas Gerais.
When asked when the global coffee industry will have a shortfall of beans, Nogueira said high coffee prices are here to say for long because of a reduction of coffee production in Colombia because of 28 months of consecutive rainfall, lower production in Honduras, and the uncertainty of production of Brazil’s 2023 now impacted by the recent hailstorm.
Producing nations like Peru, Venezuela and Ethiopia are increasing coffee output, but their production is insufficient to cover the shortfall of beans from larger producing nations like Colombia.
Colombia is expected to produce around 12 million bags of 60-kg in the calendar year 2022, down from an average of 14 million bags in 2015-2020 hit by 28 months of consecutive rainfall due to the La Niña weather phenomenon.
Honduras is also expected to export less coffee in the 2021-2022 coffee year. It is forecast to ship 4.6 million bags, a reduction of 20% compared to the 5.8 million bags exported in the previous period. To date, 99.8% of the forecast has been executed.
ICO will work strongly to explain the consumer that coffee-producing nations are facing hailstorms, torrential rainfall, and hurricanes, and all of those factors are decreasing production.
“Consumers have no idea what problems the supply is facing. We must educate them so that whenever they pay for coffee is like paying for wine,” she added.
In 2022, coffee production will come lower than consumption, but the balance will be covered with coffee inventories.
When asked when there will be a shortfall in beans that will impact consumers, she replied “I don’t have the crystal ball.”
When asked why premiums on Colombian coffee have fallen sharply in the past weeks and whether she thinks Colombian beans are being replaced by cheaper beans, Vanusia said she does not think Colombian beans have been replaced by beans from other cheaper- producing nations.
“The base price is at its highest level, and whenever we have the highest quality ones so high, the margin between ICE and premium decreases. For the buyer, there is a ceiling at which they are willing to pay,” she noted.
The global economy is facing high inflation, so at the end the buyers have to leverage what prices are they willing to pay and what people is willing to buy.
In other news, with climate change some nations have improved the quality of Robustas.
ICO and Agreement
The International Coffee Organization (ICO) signed an agreement in Bogota that calls for an active participation of private actors, with a view to achieving a more sustainable global industry for the entire chain, while it redefines the internal system for calculating votes and the contributions of ICO members.
The agreement formally welcomes to the ICO table, for the first time in 60 years, the world's largest private coffee merchants, roasters, and manufacturers, along with coffee farmers and their governments.
"The objective of the agreement is to find new ways to improve conditions in the coffee sector worldwide and provide a livelihood for millions of people around the world," said Iván Romero-Martínez, president of the International Coffee Council ( CIC), highest authority of the organization.
The agreement strengthens the structure of the organization, with a more active and committed participation of private actors, with a view to achieving a more sustainable coffee sector.
The Honduran director explained that, without losing its intergovernmental character, private actors in the chain will have a more active role in the organization, which includes the public-private operating group to work together in favor of the industry's sustainability, where coffee growers are the first link.
The private sector advisory board will be transformed into the affiliate members' board under a new institutional framework, bringing in non-governmental members for the first time since 1963, when the ICO was created under UN auspices.
By Diana Delgado
