Colombia Suspends Purchase of Coffee for Forward Deliveries
Bogota (Coffee Network)- Colombia, the world's third largest coffee producer, decided to suspend the purchase of coffee for forward deliveries as a measure to prevent the unfulfillment of contracts, finance minister Jose Antonio Ocampo, said.
“Based on a series of analyses carried out by the Federation and presented to the National Committee of Coffee Growers, it was decided to suspend the purchase (of coffee) for forward deliveries,” Ocampo said during the annual coffee summit held by the coffee growers federation.
That means the coffee growers federation no longer authorizes coffee cooperatives to engage in forward purchases of physical coffee due to the counterparty risk.
Since 2003, the Federation has promoted the sale of coffee for future delivery among producers as an instrument to stabilize coffee income.
Taking as a reference the situation of low prices registered in 2018 and 2019, the coffee union offered this alternative within the framework of the Contract Farming program of the previous government, Ocampo said.
The effects on the Brazilian harvest, caused by adverse weather conditions registered at the end of 2020 and mid-2021, together with the logistics crisis triggered by the COVID-19 pandemic and the movements of the peso against the dollar, raised the internal price to levels historically high.
As a result, coffee growers are not fulfilling with the delivery of coffee at prices stipulated with cooperatives.
Likewise, to protect both the financial health of the coffee grower cooperatives and the purchase guarantee, payment agreements were signed with 19 coffee cooperatives, granting them extensions for the delivery of the coffee to the National Coffee Fund. To date, agreements are pending to be negotiated and signed with five more cooperatives.
Progress in compliance by the cooperatives is subject to permanent monitoring by the National Committee of Coffee Growers, since it is responsible for ensuring the integrity of the resources that are the property of the country's coffee growers. “However, on behalf of the national government, I want to invite you as union leaders to approach the producers to remind them of the importance of delivering coffee to the cooperatives,” he added.
Meanwhile, to maintain the provision of the purchase guarantee service in all coffee-growing regions, the national committee approved the recognition of operating expenses derived from the opening of coffee purchase points and whose administration has been delegated to Almacafé.
New government in favor of regulation for Colombian Robusta Exports
The administration of Colombian president Gustavo Petro will support the harvest of robusta coffee, Ocampo said.
Colombia has an environmental and social offer in the Orinoquía and in other regions of the country, including some that have been epicenters of the conflict, which are adequate for the cultivation of this type of grain, he said. “Furthermore, this production can be an economic alternative to replace the imports of around 1.8 million bags that enter the country for the production of blends and soluble coffee for the domestic market. Robusta cultivation also presents an opportunity to replace illicit crops,” he added.
Robusta will be exempted from paying the coffee contribution, a tax paid on coffee exports. The coffee contribution is paid per pound of Colombian mild coffee, which by definition corresponds to washed arabica coffee that meets the quality required by the New York stock market.
“The coffee contribution would not be applied to the export of robusta coffee produced in Colombia due to the lack of regulation. This issue should also be the object of attention by the National Committee of Coffee Growers,” Ocampo noted.
The Ministry of Finance said the 21st century has been characterized by an increase in world coffee consumption, with the epicenter in emerging economies whose demand is represented by lower quality coffees and a higher proportion of solubles, Ocampo.
It is precisely in this type of market segment where the participation of robusta coffee in consumption is high. For their part, roasters have favored the use of robusta in blends in search of profitability.
Likewise, to the extent that consumption takes place more and more outside the home, the demand for espresso-based drinks is favored, which tends to be used mainly in their preparation.
For these reasons, the supply of robust coffee has grown at higher rates than world production: at the end of 2021 it represented 44% of the world coffee supply, while at the beginning of the century it was 33%, Ocampo added.
Currently, there are crops of this variety in the country. Since 2018, Agrosavia has carried out trials with the variety in the experimental stations of Turipaná, El Mira, Carimagua and its Taluma headquarters, located in different parts of the Colombian geography.
“In the opinion of the government, there is also a legal basis for the National Committee of Coffee Growers to regulate the matter,” he added.
Renovation
Colombia has renovated just 48,650 hectares of coffee and the administration of the new president promised to ensure the annual renovation of 85,000 hectares, Ocampo added.
Renovating 84,000 hectares per year. The Ministry of Finance said it will earmark funds to renovate slightly more than 35,000 hectares in 2023.
The Finance Minister also asked the Departmental coffee committees to grant 15 billion pesos ($3.12 million) to help cofinance the renovation of the remaining hectares.
“There is a government's interest in supporting the renewal of the coffee park by providing incentives for the fertilization of the coffee plantations, as well as the allocation of resources from the Rural Capitalization Incentive for the renewal by sowing varieties resistant to rust,” he said.
Meanwhile, the details associated with the delivery of incentives within the framework of the program will be discussed during the last session of the National Committee of Coffee Growers to be held next week. The Ministries of Finance and Agriculture, Finagro and the Federation work on its conception.
Taking advantage of high coffee prices, growers are not renovating plantations. Renewals for the 2016-2021 period have been below the optimal level, which is why which the percentage of aged technical crops has begun to increase, going from 14% in 2015 to 17% in 2021, Ocampo noted
“As the coffee plantations age, productivity per hectare will decrease, ultimately affecting production.
By Diana Delgado
