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Colombian coffee makes the most of rising prices, high premiums and fall in peso

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Colombian coffee producers are benefiting from the falling value of the peso against the dollar, rising internal prices and a higher premium, which will help them recoup losses from recent years, the head of the National Federation of Coffee Growers said.

 

Coffee growers in the South American country, the largest producer of washed arabica, have faced a crisis in recent years because of low prices.

 

Colombia lost 40,000 hectares of coffee cultivation between 2015 and 2019 as farmers decided to abandon the industry due to low prices. The country has 855,000 hectares of coffee crops, on which more than 500,000 families depend.

 

"We’re a long way from talking about a bonanza but what we can say is that we have reached a level where coffee growing is profitable, from which Colombian coffee growers can earn enough to live decently," federation head Roberto Velez told Reuters on Wednesday.

 

Farmers’ earnings cover estimated production costs of around 800,000 pesos ($208.50) per 125 kilogrammes of coffee. The majority of costs come from labour and fertilizer.

 

Internal coffee prices on Wednesday were around 1.12m pesos per 125 kilogrammes and on the Intercontinental Exchange (ICE), prices closed at 111 cents per pound. Colombian coffee receives a premium of 45 cents, which took the closing price yesterday to 156 cents per pound.

 

The situation is a stark contrast to a year ago, when prices on ICE were below $1 per pound and internal prices failed to cover production costs.

 

Velez said prices in New York, the premium, and internal prices will remain stable this year.

 

"I don’t see the dollar returning to 3,000 pesos, or the Colombian coffee premium dropping to 4 cents," Velez said in his Bogota office.

 

He said Colombia, the third-largest producer after Brazil and Vietnam, will focus on maintaining the quality of its coffee so as to conquer the increasingly demanding international market and to guarantee sustainability for coffee growers via premiums.

 

Velez forecast the coffee harvest in 2020 at 9 trillion pesos - a 25% increase on last year. Production for the year is expected in a range of 14m-14.2m 60-kilogramme bags, Velez added, though global consumption will drop because of the impact of coronavirus.

 

"What you see is that despite downturns in the economy, people still drink coffee. They keep enjoying the small luxury of a quality cup of coffee," he said.

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