Our April origin report brings us back to Colombia as many regions in the country are beginning to harvest either their main or fly crops. While the country is still experiencing logistical and operational difficulties related to the COVID-19 pandemic, the response from state and industry authorities has been able to mitigate much of the impact of the pandemic on Colombia’s supply chain compared to many other coffee producing countries.
The World Market
C-Market Analysis
Source: Tradingview
After the rally in February the market took a bearish turn and fell to the $1.20 price range. Support was found at $1.28 in early March and the market bounced back to $1.35, after which some market resistance sent the price spiraling down to $1.20. The market has not dipped under this price since November 2020, and a further downturn would signify a break in support.
Global Coffee Industry Statistics and Analysis
The ICO monthly market reports the following statistics on pricing, supply, demand exports globally:
The ICO composite indicator rose slightly, by 0.8%, in March averaging 120.36 US cents/lb compared to 119.35 US cents/lb in February, confirming an upward trend over the last five months. This is the highest monthly average since coffee year 2017/18. However, [February] reversed this upward trend and prices weakened in the final days of the month, recording their lowest levels in the last two days of the month. Total exports by exporting countries to all destinations totaled 10.47 million bags in February 2021, compared with 11.16 million bags in February 2020. Cumulative exports from March 2020 to February 2021 are provisionally estimated at 128.57 million bags against 130.97 million bags recorded from March 2019 to February 2020. Exports over the first five months of coffee year 2020/21 totaled 52.81 million bags compared to 51.53 million in coffee year 2019/20. World consumption for coffee year 2020/21 is projected at 166.62 million bags, an increase of 1.3% on its level of 164.5 million bags in coffee year 2019/20. However, world consumption still falls by 3.11% below estimated total production of 171.89 million bags in coffee year 2020/21.
Source: ICO
At Origin
Harvest in Numbers and Statistics
Over the last 12 months (March '20-February '21) coffee production in Colombia exceeded 14 million bags. This figure is a 3% decrease from the 14.4 million bags produced over the prior 12 month period. However, the National Coffee Federation reported an increase in production of 100,000 bags during the first two months of 2021 compared to 2020. This overall year-on-year change could be attributed to the renovation plan of 2020 which resulted in a reduction of area planted with coffee from 914,000 hectares to 854,000 hectares.
In accordance with the Coffee Harvest Plan 2021-22 from the National Coffee Federation, Colombia is estimated to produce more than 6 million bags of coffee in the first semester of the year. Taking health and safety measures into account, roughly 137,500 coffee harvesters will be required, including both local and migratory workers.
The central regions of the country will see 50.9% harvest concentration with 41.4% expected from the southern coffee producing regions. Boyacá, Cundinamarca, the north of Huila, Cauca, Nariño, and the center and south of Tolima begin harvesting in mid-April through August, while Antioquia, Caldas, Risaralda, the south of Huila, Valle del Cauca, Sierra Nevada and a small part of Santander may see mitaca or fly crop during the same period of time. In the department of Quindio, the capital of the Colombian Coffee Axis or Eje Cafetero, half of the municipalities will start harvesting the main crop in April while the other half will begin their harvest in late July.
Coffee flowers and cherries at La Maria in Nariño, Colombia
Coronavirus Impact
A series of safety measures and protocols developed by government health authorities with the support of the National Coffee Federation were efficiently coordinated and implemented at each stage of production across the country in order to keep COVID-19 infections at bay. The National Police and army forces were assigned to accompany the harvest in the most remote areas of coffee production, providing security and communication support.
Despite logistical difficulties associated with the lockdown, the coffee sector has played an important economic role through the pandemic and has acted as a "hero in the economic sense," according to Roberto Vélez, President of the National Coffee Federation (source). Analytics from Grupo BANCOLOMBIA noted that logistical and operational limitations caused by COVID-19 have pushed importers and roasters to increase their inventories in order to ensure supply stability.
According to a recent report by the International Coffee Organization, Colombian state and industry authorities have managed to offset COVID-19's impact on the supply chain compared to other coffee producing countries. This fact along with the slow down in harvest during January and February 2021 could explain the increase in the premium paid of more than 70% year-on-year for Colombian Milds.
A view from Finca El Mirador in Huila, Colombia
Future Outlook for Ally Coffee in Colombia
While uncertainties created by the pandemic have led to operational delays, and overall port congestion has resulted in a slight shortfall of inventory stock at several warehouse locations, our Colombian operations have been growing steadily over the past 12 months. Moving forward we will continue to support all of our partners in Colombia, improving our communications, pursuing greater efficiency in operations, and maintaining organic growth in the country. We're also excited to continue opening up opportunities for new regions, producers, and associations as we increase our market share globally. Thanks to projections from our core suppliers in Colombia and the overall harvest outlook, we're happy to say that we have positive expectations for the upcoming harvest.