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Many Colombian Coffee Cooperatives On Risks of Disappearing Because Of Coffee Defaults

By: Diana Delgado, Contractor

Many Colombian Coffee Cooperatives On Risks of Disappearing Because Of Coffee Defaults

 
Author Full Name: Diana Delgado
Latin American correspondent
Diana.Delgado@stonex.com

Many Colombian Coffee Cooperatives On Risks of Disappearing Because Of Coffee Defaults

Coffee Network (Bogota) Many Colombian coffee cooperatives are on the risks of disappearing because Colombian coffee growers, who had committed to deliver beans in the futures’ market, have failed to deliver 50 million kilos of parchment coffee, or about 549,450 bags of 70-kg, according to Colombian economist Aurelio Suarez.

“Coffee cooperatives are in a crucial predicament. … They face an unusual setback due to high international prices. Having previously traded with thousands of coffee growers at values close to a million pesos per load and with delivery commitments abroad, they face a bottleneck, as producers, seeing prices rise to more than 1.8 million pesos, have decided to default and refuse to move their coffee to the cooperatives. The shortage, which could reach 500,000 60-kilo bags, with an extra cost of 200 million dollars, would sink the cooperative system, “Suarez said.

Coffee cooperatives lost almost COP25 billion Colombian pesos in 2020.

The growers committed to sell beans in the futures market at an average of 1 million and 1.2 million pesos per bag, but coffee prices touched as high as COP1.9 million earlier this year, many growers unfulfilled with deliveries.

The largest defaults are present in the provinces of Huila and Antioquia, Colombia’s first and second-largest coffee producing provinces respectively. They have failed to deliver 15 million kg of parchment coffee each, a well-known international coffee trader said.

As a result, some 30 million kg of coffee are not reaching to coffee cooperatives, private exporters and FNC, he added. The balance 20 million kg of parchment coffee is not being delivered by growers in the rest of the country.

This situation has the risk of vanishing many coffee cooperatives in Colombia.

According to the cooperatives’ regulator Supersolidaria, several cooperatives are reporting growing losses so far this year. The coffee cooperative of Manizales began reporting financial losses in March of 2021 with 108 million pesos, but losses increased to COP282 million in April, before jumping to 1.101 billion in August, Supersolidaria figures showed. Although the Manizales coffee cooperative declined to speak with Coffee Network, losses could be attributed to defaults on coffee deliveries. The Manizales coffee cooperative began 2020 with losses in January, February, March and April, but it reported a profit in May.

Supersolidaria said losses at coffee cooperatives do not depend exclusively on the breaches in the delivery of future contracts, but also on other factors such as economic, weather and public order factors, which coffee farmers face. “In addition, the financial results of Cooperatives are cyclical due to the dynamics of the harvest times and the good management carried out by their administrators in minor business lines, such as: the sale of agro-inputs, fertilizers, machinery, technical services and support throughout the coffee bean benefit cycle,” it noted.

A total of 16 coffee cooperatives report monthly financial results to Supersolidaria. In addition, 16 coffee cooperatives report quarterly results to Supersolidaria, while 34 coffee cooperatives report biannual results to Supersolidaria.

Coffee Dignity and Agriculture dignity, a group that advocate for improved living conditions for growers, decided to send a letter to the Minister of Agriculture to seek solutions to save coffee cooperatives.

“A matter of the greatest importance haunts, quite clandestinely, the house of Colombian coffee growers. Its effects can be so serious that they put many coffee growers' cooperatives in the country at risk of ending up and taking the purchase guarantee system that still accompanies the commercialization of Colombian beans to a debacle.

By Diana Delgado

 
  • Coffee

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