The FNC Redoubles Efforts To Increase Profitability Of Colombian Coffee Growers

Bogotá, February 26, 2019 (FNC Press Office)- In this 2019, the Colombian Coffee Growers Federation (FNC) redoubles efforts to increase profitability of producers, which includes insisting on the importance of the global industry’s co-responsibility for a sustainable chain, its CEO, Roberto Vélez, said during a press conference held today in Bogotá.

At the domestic level, the FNC will work on three specific objectives: to increase productivity of coffee plantations, reduce production costs and raise domestic coffee consumption.

For the first two objectives, the "More agronomy, more productivity" program will continue to be the great support. Thanks to this agronomic strategy, 81% of the coffee area is already planted with resistant varieties, productivity is 18.83 bags of green coffee per hectare, and average age is 6.8 years; however, to maintain these good results, at least 10% of the planted area must be renewed every year.

Besides being the first line of defense against rust, renovation of coffee plantations allows not only to maintain, but also to raise their productivity, which in turn directly improves producers’ income.

Last year, 9.4% of the total area was renewed, a good indicator, but one that confirms that renovation remains a challenge that can only be achieved if the producer's will is combined with dissemination campaigns and access to financing sources, to which the FNC remains committed.

With the good performance of all these variables, added to a more favorable climate than in 2018, coffee production for the first half of the year is estimated at 5.89 to 6.37 million bags, for an annual harvest that would border on 14 million bags.

In cost reduction, the launch of selective picking with the help of floor meshes and the Brudden DSC-18 shaker, developed by the National Coffee Research Center (Cenicafé), was a big step in that direction, so the FNC will continue working to promote adoption of these technologies among a greater number of producers.

Government and legislators will help raise domestic consumption

Regarding the third objective, allocating a large part of Colombia’s exportable coffee supply to domestic consumption helps improve the international price, which since 2018 has sharply dropped. The FNC hopes that a good amount of the exceptional coffee produced in the country will begin to be consumed by the coffee growers themselves, this being a way of supporting each other as a united sector.

As a benchmark, domestic consumption in Brazil is 5.5 kg per capita per year, while Colombia does not even reach 2 kg. For this purpose, there are more and more allies, including the national Government and the legislators, who are currently working on a bill that stimulates domestic coffee consumption through purchases by public institutions and the inclusion of the drink in the breakfasts that the Colombian Family Welfare Institute (ICBF) supplies to children.

Alternatives to Colombian coffee trading on the NYSE are evaluated

On the other hand, the FNC CEO announced the possibility that the Colombian coffee stop trading on the New York Stock Exchange, as current prices do not reflect its reality and quality. "At these price levels, our coffee farming is not sustainable," he said.

Vélez explained that the international coffee price now largely depends on what happens in Brazil and that in the next four years the price is not expected to improve substantially; this leads to constantly asking the Colombian Government emergency measures such as direct subsidies to the domestic price.

"Those wanting Colombian coffee will pay what is fair, that is, the costs plus a small profitability," the CEO noted, clarifying that the measure has still to be consulted with the producers themselves and the industry. "It is not a decision already made," he noted.

"Colombian coffee growers cannot continue to be beggars, that is not our coffee farming," he stressed.

In this sense, Colombia is already working with other allies, such as the Central American producers. For this purpose, a summit of producer countries in September is planned, within the framework of the UN General Assembly, co-led by the Colombian President, Iván Duque, and the FNC.

The CEO explained that the current fall of prices is due to several factors, including a global surplus in the market, with production in Brazil of 60 to 65 million bags. "The industry feels well supplied," he said.

Co-responsibility of all actors in the chain is a priority

So the search for co-responsibility of all actors in the coffee value chain is still a priority for the FNC, an issue to be addressed in meetings with important industry representatives next week in Atlanta, within the framework of the NCA Convention, the ICO Council late March in Kenya and the World Coffee Producers Forum in July in Brazil.

It is worth reminding that the international reference price for mild coffees (Contract C) completes 27 months falling systematically, from 160 ¢/lb in November 2016 to less than one dollar in recent days. Since August 2006, Contract C did not fall below the dollar per pound.

Mainly three factors have brought the industry back to this point: the devaluation of the Brazilian currency (the largest producer in the world), which has allowed obtaining more reals per coffee bag; a harvest volume larger than expected in that country, and the sale of futures contracts by investment funds, where a high degree of speculation persists to the detriment of coffee producers.