Agriculture

Wake Up and Smell The Coffee

Coffee

A steady support behind the Colombian coffee industry has been the Federación Nacional de Cafeteros. Founded in 1927, it is the largest rural non-profit organization in the world. It represents […]

A steady support behind the Colombian coffee industry has been the Federación Nacional de Cafeteros. Founded in 1927, it is the largest rural non-profit organization in the world. It represents the interests of the growers and helps to defend their position when in need. The organization has also launched many social programs over the years to help develop the industry, the lives of the farmers, as well as the environment. One of Federación Nacional de Cafeteros’ main priorities is to find new ways to increase the value added that the farmers and producers experience. To help achieve this goal, the organization established the National Coffee Fund in the 1940s. This fund offers a Purchase Guarantee Policy, meaning farmers are able to sell their coffee at a transparent minimum price. The price is calculated using a formula, which takes into account the current international price and the exchange rate, as well as other factors that affect coffee prices. However, farmers are able to sell their coffee at higher prices than this by developing special characteristics for their coffee, such as organic. They are not obligated to sell their product at the minimum price, but if they wish to, there are over 500 locations to do so and they can sell as much of their output as desired to receive approximately 95% of the value. Due to the Federación Nacional de Cafeteros, growers are more aware of coffee prices at the time of planting, meaning they can take into account any changes or special requirements to efficiently plan their production and better manage their cash flows.

Colombia is the world’s fourth-largest producer of coffee, behind Indonesia in third, Vietnam in second, and Brazil in first place. According to Statista, the online statistics group, Colombia produced 465,000 tons of coffee in 2012, only slightly behind Indonesia at 657,000 tons, but significantly behind Vietnam and Brazil, which managed to produce 1.29 million and 3.04 million tons respectively. Luis Genero Muñoz, General Manager of Federación Nacional de Cafeteros, explained in conversation with TBY how production has remained steady. “So far, 2014 has been a very positive year, and we expect to close it at the same level as 2013; this amounts to 11.5 million bags of coffee.” Muñoz went on to explain that “gourmet and high-quality coffee consumption grows every year at an average of 5% to 6%, and we are a significant part of this market.”

Currently, around 43% of the coffee that Colombia exports is recognized as very high quality, while 60% of exports are classed as specialized. The numerous free trade agreements (FTAs) the country has signed have also helped to boost Colombia’s coffee presence in the world with 95% of the country’s production currently being exported according to the Federación Nacional de Cafeteros. The US is the largest importer of Colombian coffee, accounting for around 42% in 2012 and 2013, which was followed by Japan, Belgium, and Canada, importing 10%, 7%, and 7% of total exports, respectively. However, increasing costs and falling prices are putting a strain on farmers. In 2013, farmers claimed the cost to produce a 125-kilogram bag of green coffee was $425, while the price to sell was $295. Hence, between 2013 and 2014, the government is offering $1.2 billion of direct subsidies and financial assistance to farmers.