Origin Report - Colombia

As 2020 draws to a close we present the final origin report of this year with a focus on Colombia. As Colombia’s harvest continues in different regions throughout the country it is hard to label this as either a pre-harvest, harvest, or post-harvest report. Nevertheless, it’s safe to say that coffee from Colombia will continue to arrive at the ports throughout the coming months. In this report we hope to shed some light on the global coffee market as well as the situation in Colombia to keep you informed as you purchase, roast, and enjoy your Colombian coffees.

The World Market

C-Market Analysis

C Market Candlestick Chart, Sept–Dec
Source: Tradingview

Above is the candlestick chart for the ‘C-market’ over the last three months, specifically for the December delivery month. In the month of November the market rebounded firmly from just above the one dollar mark it had reached at the end of October. The month closed 15% higher than it opened and showed much higher volatility, reaching $1.24 on November 27. The rapid surges in November saw quick corrections to them as well, but the price level found support at $1.15 and closed out the month at $1.18. The market continues to trade in the range of $0.95 to $1.35 as it has throughout the last year.

Global Coffee Industry Statistics and Analysis

The International Coffee Organisation reported an increase in prices due to a prolonged drought in Brazil, hurricanes ETA and IOTA in Central America, and a delayed harvest in Vietnam. However, the recovering global economy and continued projections for global overproduction limited the total price surges. Below is an excerpt from the ICO report on prices and production for the month of November.

In November, the ICO composite indicator rose by 3.6% to 109.70 US cents/lb as prices for all group indicators increased, except Other Milds, which fell by 0.9% to 150.73 US cents/lb. World coffee production in the year 2019/20 decreased by 1.6% to 168.55 million bags as a consequence a 5.1% decline in Arabica output to 95.73 million bags, while Robusta production rose by 3.2% to 72.82 million bags. South America’s production fell by 4.6% to 78.87 million bags, due largely to the decline in Brazil’s Arabica output in the off-year of the biennial crop cycle. Production from Asia & Oceania grew by 4.1% to 50.07 million bags, due largely to the recovery of output in Indonesia and Vietnam. Production in Central America & Mexico declined by 4.5% to 20.76 million bags, while Africa’s output remained stable at 18.86 million bags. World coffee production exceeded global consumption by 961,000 bags as world coffee demand decreased by 0.9% to 167.59 million bags.

ICO Composite Price Data Graph, Nov '18–Nov '20
Source: International Coffee Organization

At Origin

Harvest in Numbers and Statistics

The coffee industry always has a relevant impact on Colombia’s economy. A major portion of the population is involved in coffee production with 854,000 hectares planted with coffee, and 547,000 families across 22 departments depending on the crop. In the midst of the current COVID-19 pandemic—including uncertainties created by lockdowns and travel restrictions—total coffee harvested declined 15% in October 2020 compared to the nearly 1.4 million bags produced in October last year. However, the FNC (National Federation of Coffee Growers of Colombia) reported on November 5, 2020 that the numbers indicate good production for the year overall, continuing the trend of the last five years averaging a total of close to 14 million bags.

Coronavirus Impact

COVID-19 may further exacerbate the impacts of climate change, inequality, and poverty that have forced nearly 20% of Colombia’s population into a food crisis. The food supply system is suffering a global crisis, struggling with the consolidation of supply chains. While parts of Colombia have started to open up in the wake of the pandemic, rural communities continue to experience lockdowns to curb the spread of the virus. The Ministry of Health reported 64,324 active cases in November.

One of our core partners at origin, COOP CAFES DE ALTURA in Buesaco, Nariño, ran a food donation initiative that allowed families to donate their food crops. These donations were distributed to people in need in the city of Buesaco where COVID-19 has caused extensive unemployment. The Coop staff, who generally advise and consult on coffee crop care, were promoting home garden setups and better post-harvest management with improved storage options. The coop also helped plan and arrange the circulation of coffee pickers within the designated area to ensure that the crop is harvested on time. This circulation of pickers was also meant to avoid potential spread of the virus from other regions as people would typically travel to be part of the workforce.

The head of COOP CAFES DE ALTURA, Jose Ignacio Goméz:

“Most of the coffee production sectors in Nariño are very remote from the townships and way too far from the capital of the department. At the beginning it looked worrisome, first of all, because the communication from the state was not clear and nobody knew what to expect. On the other hand, the communication with the rest of the supply chain became so weak that we didn't know if the coffee could be exported anytime soon. Families were suddenly cut off from local food markets - everything was paralyzed from March till recently. The government has imposed a process where people can only leave home on certain days based on their identification numbers.”

Green coffee cherries in Nariño, Colombia
Green cherries grown by the Aponte Community in Nariño, Colombia

Public transportation has been suspended and community leaders have set up roadblocks that only allow food trucks and ambulances through. Coffee producers in the central-northern regions have had time to prepare their operations as the harvest there is just now beginning, but previous delays in operations all over the country have left people concerned about collecting and transporting crops to storage facilities and export hubs.

The majority of Ally Coffee's small-scale producer partners in many regions rely on a labor exchange with neighboring families to save on production costs. This important resource exchange has been limited due to the impact of COVID-19. Our exporting partners in Huila, Aromas del Sur, implemented guidelines for its El Puente processing facility to be able to comply with social distancing and ensure worker safety. All of our partners across Colombia have had to develop and implement additional health security measures, resulting in safer conditions but also higher production costs.

Fresh red cherries in Colombia
Freshly harvested cherries at Finca Santa Elena in Antioquia, Colombia

In response to the pandemic, the National Federation of Coffee Growers (FNC) developed a biosafety protocol for producers which has been shared with other countries as well. Technical Manager of the FNC, Hernando Duque, says that the protocol's development and quick communication throughout the workforce were part of a comprehensive strategy, articulated as part of the Harvest Plan. Roberto Vélez, Head of the FNC, stressed that the coffee union understood the importance of formulating this protocol from the beginning of the pandemic. Its purpose was to help producers take care of their health first and foremost in order to collect the harvest. This has contributed to the coffee growing areas of the country remaining relatively safe from the virus. The General Manager also highlighted the need for a more self-sufficient union going forward, given the expected budget limitations of the Government.

In addition to other responses, important measures have been taken to support connectivity in coffee growing regions through the installation of additional telecommunication equipment. A few reasonable VAT (value-added tax) exemptions for consumables were approved as well.

Future Outlook for Ally Coffee in Colombia

The most recent harvest has been unlike any other due to COVID-19. Fortunately, the harvest, post-harvest processing, and exports were not largely affected. The FNC will have to continue with their foresight and preventative strategies to mitigate further challenges that will come with growing climate concerns, global economic slowdown, and a dip in overall coffee consumption. Regardless, labor force shortages, ongoing spread of the virus and its effects, and an unstable political situation will mark the 2020–2021 harvest in one way or another.

We are in constant contact with our producer and exporter partners to ensure the harvest is as smooth as possible next year. The challenges that lay ahead of us are unprecedented, but by making a collaborative effort across the value chain we can ensure a supply of great coffees, economic sustainability for the producers, and continue to pave the way forward.

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