Priority of Colombia’s Coffee Growers: Profitability FNC General Manager
Priority of Colombia’s Coffee Growers: Profitability FNC General Manager
Coffee Network (Bogota)- The priority of Colombia’s coffee growers is profitability as the current price for many coffee growers is below the production costs, leading to request the activation of the mechanism of the coffee stabilization fund, German Bahamon, general manager of the coffee growers federation.
“We need to alleviate this burden, because if we do not do so we would undermine sustainability future. With the ministers and their teams we are speeding up the analysis to make decisions about the coffee stabilization fund,” Bahamon, told the coffee growers and committees of departments at the 92 annual coffee summit.
The international coffee price, the price differentials of the different origins and the exchange rate have had a correction, which has translated into variations abrupt changes in the internal reference price “which does NOT mean that there is no tightness in our cost effectiveness,” he noted.
But the finance minister Ricardo Bonilla said the coffee think tank CRECE has carried out a study which has 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 COP1.4 million pesos. As a result, coffee growers are receiving more funds than production costs, implying that the coffee stabilization fund will not be activated right now, Bonilla noted.
Government institutions as well as the coffee growers federation are now regulating the coffee stabilization fund. The fund will be managed by the National Coffee Committee. The National Coffee Committee is comprised by the ministers of agriculture, commerce and finance, the director of the government’s National Planning Unit, the 15 members of coffee committees of the growers federation (FNC) among others.
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 CRECE, which is COP1.2 million in production costs.
Meanwhile, Colombia’s coffee output is set to increase in 2023 after two years of depressed output hit by the La Niña weather phenomenon, Bahamon said.
Exports to growing nations in Asia Pacific
Colombia is exporting higher amounts of coffee to distant nations like China and India, which has an enormous population. FNC should replicate the efforts it did with Japan, which is a large buyer of Colombian coffee.
Colombia will export around 137,000 bags of 60-kg to China which will weigh 8% of the country’s total coffee exports, up from 2% a few years ago.
“It is precisely these new markets that owe us the greatest effort.
Markets such as India and China offer us a population of 2.8 billion inhabitants, that is, 8 times the United States market.
“We can then lose a minute in that effort of being there positioning
Colombian Coffee, opening the market for our coffee activity
marketing and accompanied by exporters, promoting consumption
of 100% Colombian coffee, “ he said noting that FNC should prepare its capabilities to meet the demand for green, roasted and freeze-dried coffee, as well as to have presence of the Juan Valdez stores.
FNC should also focus on expanding Colombian coffee in neighboring markets such asVenezuela, Mexico and Brazil.
“For this reason, we have spoken with the Minister of Commerce, Industry and Tourism on the need to work on the removal of tariffs that make our product roasted at origin more expensive when transported to some of these countries,” he noted.
Bahamon stressed that the beans set to be shipped to those markets must be the best quality of Colombian coffee .
Colombia must also work on promoting 100% coffee consumption
“You should accompany me in the need to promote the purchase of cherry coffee in their regions, to not only improve the cup, but more importantly, ensure the consistency of the quality of Colombian Coffee as a differentiating attribute.Colombia should be the world leader in specialty coffees, “ he noted.
FNC has started the first pilot to carry out the industrial capacities to the regions and thus accompany the coffee grower in the transformation of coffee, the construction of marketing narratives and the marketing of their products, by bringing the producer closer to the consumer.
That will be possible thanks to the first co-roasting center or shared profiling and roasting laboratory which will open its doors in Almacafe Neiva in the first quarter of 2024.
Bahamon said he has been listening all coffee committees in order to support the purchase guarantee of coffee.
Colombian coffee is also empowering women in coffee growing, not only to improve their living conditions, but also to have a positive impact on the health and education of families, generating benefits at the community and national level.
“Today I want to announce that in 2024 we will have a women's coffee, roasted at origin in the largest supermarket chain in the United States,” he said without naming the supermarket chain.
In marketing, the FNC has made the decision to turn its offices abroad so that they perform thoroughly in the consolidation of markets and their expansion. “These times require light structures focused on results to advance in this purpose, taking advantage of the technological tools that bring us closer to our clients. We need them to be commercial offices that work for all our products,” he said. For Procafecol, which controls the Juan Valdez brand, FNC has ordered to open new markets and progress has been made in international expansion with the signing of alliances for Egypt and the United Arab Emirates.
By Diana Delgado
