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Colombia Announces Price that Triggers Coffee Stabilization Fund

By: Diana Delgado, Contractor

Colombia Announces Price that Triggers Coffee Stabilization Fund

 
  • Diana Delgado
  • Latin American correspondent
  • diana.delgadol@stonex.com

Colombia Announces Price that Triggers Coffee Stabilization Fund

Bogota (Coffee Network)- Colombian Minister of Finance Ricardo Bonilla said the coffee price stabilization fund will be activated when local coffee prices drop below 1.280 million Colombian pesos ($336.8) per load of 125kg of parchment coffee.

Regulation has set a benchmark price that triggers the bailout. Once activated it will last four months.  The stabilization fund will pay COP76,000 per load of parchment coffee.  

 Local think tank CRECE 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 was paid at COP1.52 million yesterday.

“Right now, we are in orange alert when comparing to production costs, prices still have to drop to the red alert when the (price stabilization fund) activates,” Bonilla told reporters on the sidelines of an extraordinary meeting at the coffee growers federation.

Agriculture minister Jhenifer Mojica said the government asked the Colombian coffee growers federation to update production costs, while explained that  small coffee growers will be ones who will benefit initially with the price stabilization fund.

The coffee stabilization fund currently has COP370 billion Colombia pesos, of which the former government contributed with COP195 billion.

The highly awaited announcement happens at times coffee prices have recovered in recent days, but in the past growers claimed they were producing at a loss as internal coffee prices were for a long-time below production costs.

Mojica has said 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.

Coffee growers are allocating USD $0.05 cents per pound exported as part of the  so-called coffee contribution to feed the stabilization fund. The coffee stabilization fund was created in 2019.

After the four-month period, the government will evaluate how growers will contribute to feed the fund. “We are in discussions with coffee lawmakers to generate a better mechanism to finance the coffee price stabilization fund because up to now we have not taken advantage of the bonanza,” Bonilla said nothing that when coffee prices are higher, the fund should collect more money.

Mojica also stated that they evaluate other sources of funds to potentially feed the price stabilization fund.

Bonilla said the administration of Gustavo Petro does not pretend to create a new union parallel to FNC.

Bonilla said the government requested FNC a programme to expand coffee land in Colombia. Today, the country has 840,000 hectares but coffee farms have 2.8 million hectares. “The question is in those farms can coffee land be expanded?”, he concluded.

By Diana Delgado

 

  • Coffee

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