Our August origin report looks at Colombia as the harvest slows down in the country's southern regions. Internal coffee prices continue to soar in-country as farms have been battered by adverse weather. Elsewhere, the C Market continues trading with high volatility, global coffee inventories continue to dwindle, and concerning reports from the fields indicate that little is certain as the final months of coffee year 2021/22 begin to draw to a close. Read on for a look at the latest C Market numbers, updates from the International Coffee Organization (ICO), news from Colombia, and a field report by Omar Felipe Molano Castellanos of our Colombian sourcing team covering his recent visit to some of our partners in Nariño.
The World Market
In the last couple of weeks the market has traded in a relatively tight range between roughly $2.05–2.20, down from the $2.15–2.40 range that we’ve seen throughout much of the year since March. Despite staying in this narrower band, the market still shows significant volatility with several single-day price increases and drops close to or greater than 10 cents.
Prior to entering this new trading band the market was in a descending trend which started at the beginning of June. The market moved from $2.40 at the start of the month all the way down to $1.95 on July 14 after prices fell rapidly starting on June 22. This $1.95 mark is the lowest price seen in the market since October 2021. Prices quickly picked back up to reach the $2.05–2.20 trading band starting on July 18. The market's volatility in its current range provides little insight on what to anticipate for the coming weeks or months.
Global Coffee Industry Statistics
Source: ICO Coffee Market Report, July 2022
- The ICO Composite index decreased by 5.7% averaging a price of $1,90/lb. The largest decrease was felt in the Brazilian naturals category which fell by 6.8%
- Exports have increased across the board in the last month with a notable 12% increase compared to last year in South America. Nevertheless the accumulated exports of Brazilian Naturals for the coffee year is still down 8.9%. See figure below.
- Per region we can see that exports from Africa remain stable and that Asia and Oceania are increasing. Central America and Mexico continued a downward trend and South Africa followed an on/off cycle.
- The certified Arabica stocks continue to see a dramatic decrease currently registering at 591,959 bags. This is an almost 80% decrease over the last year when in August 2021 stock was over 2.5 million bags.
- The current estimate of total production in the coffee year 2021/2022 has not changed and is 167.2 million bags, a 2.1% decrease as compared to 170.83 million bags of the previous coffee year. In stark contrast, world consumption is expected to grow by 3.3%, to 170.3 million 60-kg bags in 2021/2022 as compared to 164.9 million for coffee in 2020/2021. This means that consumption is set to out pace production by 3.1 million bags this year. With less than 600.000 bags in the certified stocks this could indicate a shortage in the short to medium term.
Harvest in Numbers and Statistics
Sourced from the USDA Annual Colombian Coffee Report, June 2022, unless otherwise noted.
As we near the end of coffee year 2021/22 (October 2021–September 2022) the latest projections for Colombia’s total production for the year sits at 13 million bags of 60 kg, revised down 5.8% from the previous projection of 13.8 million bags. This decreased production can partly be attributed to the La Niña weather phenomenon which brought 20–40% greater rainfall in the first half of the year in some coffee areas compared to historical averages. During the year, planting density increased to 5,268 trees per hectare as farmers around the country continue renovating parcels of land as part of the Federación Nacional de Cafeteros de Colombia’s (FNC) replanting program. 81,304 hectares of farmland was renovated this year—exceeding the FNC’s goal of 80,000 hectares—bringing the country’s estimated total productivity potential to 14.7 million bags.
Internal coffee prices have remained high in Colombia, driven by the relatively high C Market price, the devaluation of the Colombian peso, and the high differential paid for coffee from the country relative to other origins. Domestic prices reached a record high in February 2022 before dipping again in March, though the price holds at a high level compared to numbers dating back to January 2020 as reported in the chart below.
Looking ahead, current production estimates for coffee year 2022/23 indicate no projected change from this year’s production at 13 million bags. Despite expectations that weather patterns will return to their usually favorable conditions, productivity is likely to be hampered by lower fertilizer usage across the country as fertilizer prices remain prohibitively high. High costs for agricultural inputs continue to apply pressure to coffee producers around the world as the war in Ukraine continues and exports from Russia—a major global exporter of fertilizer components—are restricted.
While 13 million estimated bags of coffee falls short of the country’s 14.7 million bag potential, the number still rests above the 12.2 million bag average production over the last ten years.
Field Report - Nariño
At the end of July, members of our Buying Team visited Nariño to connect with some of our partners in the region. Despite only making up a small portion of the country’s total production area, Nariño is home to some of the best recognized farms in Colombia, with coffees sought out by specialty coffee lovers for their quality and diverse cup profiles. Omar Felipe Molano Castellanos of our Colombian sourcing team shares from his experiences and conversations during the trip in the following field report.
This was my first trip to Nariño and I’m glad it got to be with Ally, as it was an enriching experience to meet the producers and be able to see how the process is done and the amount of work necessary to make a single cup of coffee. Although it’s not the biggest coffee-producing region in Colombia, Nariño has 54,772 coffee farms, equivalent to 3.96% of the total harvested area in the country (Comité de Cafeteros de Nariño - CCN). The region is filled with 12 volcanoes, and is home to some of the greatest coffees you can find.
At the Farms
One of the producers I visited is Fidencio Castillo from the farm El Pedregal. I was surprised to see that the farm is 20 minutes away from the main road, so Fidencio has to travel a narrow path filled with stones to get there. To move his coffee to the drying area, Fidencio has to rent horses to get his coffee out of the farm. I was especially impressed when I found out that Fidencio pulps all of his cherries in a manual pulper on his own. Fidencio puts so much effort and affection in every bean, and I think it shows on the final cup.
Fidencio Castillo at his Finca El Pedregal
However, Fidencio told us that the yield for this year has been smaller compared to previous years. This is a situation that not only Fidencio’s living, but all of Colombia. According to the National Coffee Producers Federation (FNC), Colombia’s coffee production was 15% less between January and April compared to the same period last year.
Not only that, but another problem mentioned by the producers I visited is the lack of workers for the farms. Most of the producers get help from their families and neighbors to do the picking and other manual work on the farms. However, it’s been a challenge to get workers to help out on the farms since people are losing interest in living in the countryside and moving to the cities. This is a situation that I got to talk with José Delgado about at Finca El Encanto, who says he’s worried about who will keep the farm going when he’s not able to now that his son left to the city to start studying industrial engineering.
Hope is still left, though, as some producers like José Solarte from La María farm are showing people the potential in coffee. José is a lawyer specializing in constitutional law, and the youngest of all the farmers I got to know. At his café, La María in the city of Pasto, they hold public cuppings organized by the municipality’s administration with the aim of showing the people of Pasto the difference between commercial and specialty coffee, and the potential of this industry. They do this by holding talks and letting the clients of La María cup a commercial coffee, José Solarte’s Pink Bourbon Washed, and a stale lot of the same Pink Bourbon Washed [demonstrating the differences in quality].
Coffee flowers at Jose Solarte's Finca La Maria
Political Change in Colombia
[There is] uncertainty in the country with the new change in government that started this month on August 7th. With the newly elected president Gustavo Petro having a leftist approach, something that the country hasn’t seen in decades, many producers are [unsure] about the impact this will have on the coffee sector. For now, Petro’s government promises to stimulate the farmland and boost the agrarian economy. Most of the country has their hopes up for the upcoming changes, as seen when his favorability grew to 64% [from 42% between February and July], according to Portafolio.com.
Future Outlook for Ally Coffee in Colombia
As we look ahead in our Colombian operations we’re excited to continue offering a wide variety of coffees from throughout the country’s growing regions. You can expect to continue seeing a wide range of coffees, from consistent community lots like our Palmera Core Coffee to the diverse selection of traceable microlots and nanolots produced by our Colombian producer partners.
Now is a great time to get in contact with your Account Manager to discuss your Colombian coffee needs for the coming months, find out what we have in-store in your region, and ask about the many innovative processes, exciting varieties, and limited-releases available from Colombia’s coffee producers. You can find all of our currently available Spot offerings from Colombia on our Ally Coffee website.