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Droughts and declining consumption put the health of Colombian coffee to the test

The intensity of El Niño — the regional climatic phenomenon — has added to the rise of coffee prices in supermarkets

A worker picks coffee berries in Fredonia, in the Colombia department of Antioquia.
A worker picks coffee berries in Fredonia, in the Colombia department of Antioquia.Edinson Arroyo (Bloomberg)

The daily consumption of cups of coffee across the world has experienced an unusual decrease in the last year. According to experts, the push from expanding markets — such as China and India — has made little difference. This has only added to the bad news for Colombia, the third-largest producer of coffee in the world and a leading player in the sector alongside Brazil and Vietnam.

Concerns among coffee growers have become even more acute in recent months, due to the droughts resulting from El Niño, the regional climatic phenomenon. This will bring about an additional challenge for the future of a product that is part of the country’s identity. For decades, the export of coffee was the pillar of the Colombian economy.

Felipe Robayo — the former leader of the Colombian Federation of Coffee Growers — is skeptical about the future of consumption. Contrary to some positive projections published by the diminished (and somewhat discredited) International Coffee Organization, he emphasizes that global coffee purchases have been in a tailspin for over a year. According to calculations by the Dutch Rabobank, for example, coffee imports into the European Union and the United Kingdom fell by 13% in the second quarter of this year, while the United States registered a decrease of 11% year-over-year.

The Dutch bank notes that this is the biggest collapse it has observed in the 15 years that it has been collecting data from the sector. This situation is associated with the increase in coffee prices in supermarkets around the world — a situation that has recently begun to change. As soon as interest rates rose, Robayo notes, the international industry found it necessary to stop buying coffee — a slowdown that he calls “drastic,” as it has further inflated prices, given the limited supply.

Faced with these price increases, consumers have recently turned their backs on a product that isn’t considered essential. The context of high inflation and the devaluation of the Colombian peso against the dollar have also helped to change priorities. Albert Scalla — vice president of the U.S. financial company StoneX — adds that the succession of droughts and frosts suffered in Brazil in 2021 and 2022 “shot up prices” and pushed down consumption.

Juan Camilo Restrepo — the former commercial manager of the National Federation of Coffee Growers — acknowledges that weather anomalies (which have always posed a risk to coffee-growing) have worsened in recent years, forcing farmers and exporters to adjust: “The rains are more intense. This affects the [coffee cherries] during harvest, because it causes them to fall before they’re ripe. Droughts, meanwhile, don’t allow the [cherries] to mature. And hail storms and gales have been lifelong problems.”

His greatest concern, however, has to do with raising production volumes in Colombia, which went from an average of 14 million bags of coffee per year, to just under 11 million in recent years.

The coffee industry, argues Albert Scalla, must attack a problem that is somewhat ignored in the more than 60 coffee-producing countries: the absence of effective and sustained campaigns to promote consumption. “In a country like Colombia, you arrive at the airport, go out into the street and the first thing you find are advertisements for large breweries or soft drinks. At one point, there was a program called ‘Drink Coffee.’ But it ended. Recovering this is no longer a necessity — it’s an urgency,” he warns.

Another aspect that affects the future of Colombian coffee farming is the harvest that has just been completed in Brazil, which — surpassing all calculations — reached 64 million 132-pound bags. The neighboring country is the great hegemon of the world industry and its performance sets the global standard. “Prices depend on the weather and on Brazil. Since [the Brazilians] have had such strong numbers and next year is expected to be a super harvest of 70 million bags, a drop in international prices is already beginning to be noticed,” Scalla explains.

The report by the Rabobank Group — a central entity in the world of agricultural finance — points out that, due to the drop in consumer confidence and high interest rates, coffee bean prices in the United States have also begun to fall. This news doesn’t bode well for Colombia. The price differential for Colombian beans — a measure that establishes the additional value for its quality in relation to the average price in the futures market — fell from a high of 82 cents to just 18 cents. The price of a pound of coffee beans on the New York Stock Exchange, which was at $2, today sits at $1.52.

For Scalla, the future of Colombian coffee — whose production has been concentrated in the arabica variety, of which 56% of the world production is concentrated — depends, to a large extent, on the renewal of the coffee plantations, which have a production cycle of five years. Setbacks have resulted in fewer beans. There has also been what he calls a “generational change” — a delicate matter, due to the aging of the peasantry and rural young people moving to the cities.

Coffee-growing in Colombia is fading, as the business doesn’t yield enough benefits for farmers. This is yet another challenge for the future of a product which is characterized as being the best “mild coffee” in the world.

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