Origin Report - Colombia

Our March origin report features Colombia as the main harvest is set to begin in several of the country’s producing regions and the mitaca, or fly crop, is slated for the rest of the country. People in Colombia faced a challenging year in 2022, including high inflation and increasing costs of living, while coffee producers managed the damaging effects of the second straight year of La Niña. Globally, coffee prices rose slightly through February and volatility has held at a relatively constant level, while certified stocks of arabica dip slightly again. Read on for facts and figures from around the industry, updates on the coffee year in Colombia, and an introduction to our newest Colombian exporter partner as well as the new Buyer to our Colombia sourcing team, Gabriel Restrepo.

The World Market

C-Market Analysis

C Market candle stick chartSource: Tradingview

Since our last report, the C Market saw a brief increase in prices before settling back into the $1.70–1.80/lb range seen throughout the first half of February. The market rose as high as $1.94/lb on February 22 before seven straight trading days of losses brought prices back down to $1.77/lb on March 3. Intra-day volatility has remained relatively constant since the beginning of 2023, with only a small handful of days closing greater than +/-$0.05 against the previous day, and only one day showing a change greater than $0.10. After seeing $1.70 act as a resistance line in late 2022 through February, it’s difficult to project if the $1.70–1.80/lb range will continue to hold, or if prices will fall below the $1.70 mark again. At the time of writing (March 15), the market is currently trading at $1.72/lb, representing a 4% increase on the year-to-date and 21% decrease from this time last year.

Global Coffee Industry Statistics

ICO composite indicator price chartSourced from the International Coffee Organization unless otherwise noted. Read their full February 2023 Coffee Market Report here.

  • The ICO Composite Indicator Price (I-CIP) gained 11.4% from January 2023 to February 2023, averaging 174.11 US cents/lb in February.
  • Average prices for all group indicators increased in February 2023, with Brazilian Naturals leading the way with 14.8% growth.
  • Intra-day volatility increased 0.1% between January and February to reach 8.7%.
  • Global green coffee exports in January totalled 8.69 million bags, down 15% from the previous year.
    • Notably, this includes a decrease of 20.9% in exports of Colombian Milds and a decrease of 17.2% in exports of Brazilian Naturals.
  • New York certified stocks of arabica green coffee decreased 5.1% in February to 0.86 million bags. Robusta certified stocks grew 13.8% to 1.19 million bags.

ICO certified stocks chart

At Origin

Harvest in Numbers and Statistics

2022 was a challenging year for Colombian coffee producers, as a second straight year of the La Niña weather phenomenon brought devastating rains across the country. This heavy rain affected coffee trees’ ability to blossom, resulting in dramatic reductions in productivity. The main negative effect is the drop in the production due the continuous heavy rains that inhibit the blooming process, and the lack of sunlight because the increase in the cloudiness that reduces the photosynthesis process rate in the tree,” Gabriel tells us. “Also, the incidence of different diseases—like coffee leaf rust—increases because of the high relative humidity in the environment.” Ultimately, Colombia finished the 2021/22 coffee year with a total production of 11.7 million bags of 60 kg, down 12.8% compared to the previous year according to the Federación Nacional de Cafeteros (FNC). Exports through the first two months of 2023 are down compared to the previous year as well, totalling 1.76 million bags representing a 13% decrease.

Even though La Niña is fading away, coffee growers are continuing to feel its negative effects. Producing regions that typically harvest their fly crop December–February harvested a significantly reduced volume compared to normal. Other regions which have their main harvest in the first half of the calendar year are also expected to experience reduced harvest volumes, including Nariño, Cauca, and northern Huila.

Although it’s too early to set a firm projection for Colombia’s 2022/23 coffee year, some calculations estimate 11–11.5 million bags of 60 kg as seen in the graph from RACAFE below, indicating another potential decrease in production volume this coffee year.

Challenges throughout Colombia

There’s uncertainty for many people in Colombia as inflation and cost of living continue to rise while the Colombian peso continues to fall in value. In February, the country’s 12 month inflation rate rose to 13.28% while the total inflation in 2022 totalled 13.12%, more than four times the central bank’s target according to Reuters. Coffee producers are particularly vulnerable to this situation as they rely on several external resources for their production. One of the [industries] most affected by this situation is the agricultural sector inasmuch as the majority of inputs required are imported, and due to COP (Colombian Peso) devaluation, prices have increased in an exaggerated way,” explains Gabriel. “[Also], the cost of hand labor for agriculture has increased as much as 60% to 100% in some cases; because of devaluation people need more money to live. Considering all factors, total cost of production increased by at least 65% for the last harvest.

Coffee producer and exporter Jose Gomez tells us, “Despite ‘good prices’ it’s hard to get good profitability with a higher cost of [production] and [lower] productivity because of weather.” Jose is based in Nariño where he operates his Finca El Paraiso as well as being the co-founder and commercial manager of exporter Promotora Cafes de Altura. Nariño has been one of the regions most affected by La Niña through 2021 and 2022, where producers have experienced not only reduced productivity of at least 40%, but also impacts to their coffee’s sensory qualities. “Difficulties to fertilize due to the high costs of the products, intense rains, high cloudiness, irregular maturation, [and] difficulties for drying are some of the factors that reduced the complexity of the Nariño cup profile. We have received feedback from customers regarding the quality, but it is difficult for us as growers to do anything about it as we cannot control the weather,” he explains.

Jose Gomez at his Finca El Paraiso in Nariño, ColombiaJose Gomez at his Finca El Paraiso in Nariño, Colombia

Looking ahead, though La Niña is finally wrapping up, there is concern amongst producers about the possibility of an El Niño weather phenomenon developing later this year. El Niño usually means a huge harvest is coming, conversely to La Niña,” Gabriel tells us. “But it’s not all good news; if temperatures are too high the flower will not set and if the drought is prolonged and severe the production will be lost. Additionally, El Niño produces the perfect conditions for the coffee borer beetle to surge.

Our newest partners in Colombia

Joining our list of exporter partners in Colombia this year is Pergamino, a Medellin-based company run by Pedro Echavarria. The company has worked with smallholder producers in several regions of Colombia—including Nariño, Cauca, Huila, Tolima, and Antioquia—for more than 10 years. Pergamino works with a purpose to identify communities of producers in regions with good potential for producing high quality coffee in order to provide them with the tools needed to access international specialty coffee markets.

Gabriel Restrepo (right) with Leonardo Henao, Pergamino COO (center-right) and members of the Pergamino quality team in Cauca, ColombiaGabriel Restrepo (left) with Leonardo Henao, Pergamino COO (center-left) and members of the Pergamino quality team in Cauca, Colombia.

Members of our Colombian sourcing team recently visited one of Pergamino’s projects in Cauca in the municipality of Inza where they work with more than 150 coffee producing families. Typically, each family’s coffee production is smaller than one hectare, containing 2,000–4,000 coffee trees. Producers deliver their coffee to Pergamino’s procurement warehouse and quality laboratory locally, where all coffee is evaluated and classified according to Pergamino’s standards. Based on this classification, each producer receives a quality premium on top of the typical sale price; further, if the coffee goes on to sell for a higher price than expected on the market, Pergamino makes a proportional additional payment to each producer who participated in that lot.

Coffee producer Floro Pilimue (left), coffee cherries in Inza (top), Washed coffee being dried (bottom)Scenes from our trip to Inza: Coffee producer Floro Pilimue (left), coffee cherries in Inza (top), Washed coffee being dried (bottom)

We spoke with Leonardo Henao, Pergamino’s COO, who told us, “It feels very satisfying to collaborate with producers who are so far away and have so many needs. Inzá is located more than 4 hours away in the middle of steep mountains, it is an area very affected by the violence of the guerrillas and it is not very safe to work here. However, seeing how the lives of the producers are changing around the coffee is the most rewarding thing for us.

Gabriel told us about his experience on the visit, saying “Nowadays, Cauca is one of the most recognized regions in Colombia for its quality of coffee. However, this region is one of the most inaccessible and with the most difficult conditions to work in. The producers in this region are very small, with a very low level of development and quite poor,” he explains. “It was very surprising for me to see how Pergamino has managed to transform the lives of many of these producers through education around the production of specialty coffee. We were able to talk with several producers who are part of the Pergamino project and we could really realize how grateful they are to them. We found more than a business relationship between producer and buyer, we saw a relationship between friends.

We’re proud to partner with Pergamino, and look forward to working together to move coffee forward.

Ally Coffee in Colombia

Looking ahead, we’re preparing for the main harvest to begin soon in Nariño, Cauca, Tolima, Cundinamarca, and northern Huila, and the mitaca or fly crop harvest to begin throughout the country’s other coffee producing regions. Colombia is the only producing country where coffee is produced throughout the year, with two harvests occurring including the mitaca, during which approximately 30% of a region’s annual production is harvested. Coffee at the highest altitudes is expected to be harvested through the end of April, with freshly harvested coffee potentially ready for shipment in May. Our team anticipates even higher quality coffee from Colombia this year as the weather returns to a more neutral situation with the ending of La Niña, though there is the possibility of new difficulties arising with El Niño later this year which could impact future harvests.

Gabriel Restrepo, Ally Coffee Colombia BuyerGabriel Restrepo, Ally Coffee Colombia Buyer

We’re glad to introduce the newest Buyer to our Colombian sourcing office, Gabriel Restrepo! Gabriel comes from a coffee producing family and is an agricultural engineer with 17 years of experience working in the Colombian coffee industry. His experience includes coffee procurement, cupping and quality grading, dry mill management, and more, with over a decade of his career spent working directly with specialty coffee and specialty coffee growers. We’re excited to have Gabriel join our Colombian sourcing team, and look forward to him helping us continue to grow our operations in Colombia and strengthen our relationships with our partners there.

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