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Colombian Coffee Committee Requests Government Bailout On Low Prices
CoffeeNetwork (Bogota) –A Colombian committee of coffee growers is demanding a subsidy from the government as many farmers are already producing beans at a loss, and internal coffee prices keep on falling.
The committee of growers for the department of Risaralda is demanding a government bailout as current internal coffee prices are not covering production costs.
In a communiqué, the Risaralda coffee committee, said the government should revive a subsidy of 80,000 pesos per load of 11.5kg to ensure that growers obtain 800,000 pesos for a 125-kg sack of parchment coffee.
Internal coffee price yesterday closed at 712,000 for a 125-kg bag of parchment coffee, down from 728,000 on Thursday because of a sharp appreciation of the Colombian peso, but production costs for the same bag ranges between 700,000 and 750,000 pesos for regular growers, which means many growers, are already producing at a loss.
The internal coffee is rapidly approaching the 700,000 pesos benchmark, and some coffee analysts believe growers might then start blocking roads to call the government’s attention. Prices have dropped 8.2% since the beginning of the year as the same bag for parchment coffee was trading at 776,000 pesos on January 1.
The drastic drop in prices is explained by a decline in international coffee prices, which is trading at $1.18 per pound, while the peso has appreciated strongly. The Colombian peso has strengthened 6.9% since the beginning to the year to trade at 2,780 per dollar yesterday.
The Risaralda coffee committee says the average exchange rate was $2,943 pesos to the dollar in 2017, while the average rate so far this year is $2,857 pesos to the dollar.
Coffee prices dropped from an average of $1.33 per pound in 2017, to $1.21 per pound in 2018, the committee added.
In addition, the effects of excessive rainfall will also diminish production in Risaralda during the first half by 10% to around 1.29 million 60-kg bags, down from 1.44 million 60-kg bags in the first semester of 2017.
“Therefore, we express our concern and urgently request the national government immediate measures that allow coffee continuity, with the implementation of the Income to the Coffee Grower program,” the coffee committee said.
Coffee Dignity, a group that advocates improved conditions for coffee growers, has been requesting a meeting with the country’s Finance Minister for the past months, to outline the growers’ difficulties, and demand a change in the formula that sets internal coffee prices, but Finance Minister Mauricio Cardenas has not yet agreed to meet with them.
Oscar Gutierrez, Director of the Movement, said coffee growers will strike momentary on 4 May in front of the Agriculture Minister to call attention of government officials.
“The administration of Juan Manuel Santos is leaving, and it won’t solve anything. This problem of low internal coffee prices will be inherited by the new President,” Gutierrez told CoffeeNetwork.
Colombia elects a new president on 27 May during in the first round.
Colombia will likely have a run-off on June 17 with the new president taking the helm on 7 August.
Alejandro Corrales, a recently elected congressman, who until recently was a member of the national coffee committee to the country’s growers federation (Fedecafé) said the subsidy is urgently needed as many growers are not applying fertilizers, or are switching to more profitable plantations.
Corrales said the government could also reactivate a subsidy that benefits coffee exporters, who previously, pass through the subsidy to growers by purchasing beans at a higher price.
“It is the government’s responsibility to ensure that 541,000 families do not go bankrupt, “ Corrales told Coffee Network.
Colombia has a long history of producing beans at a loss as growers did in July 2012 until March 2013, according to several studies.
The government spent 1.2 trillion Colombian pesos ($480 million) in subsidies for the coffee sector in 2012, 2013 and 2014 when internal coffee prices reached multi-year lows, and as the government convinced growers to lift a strike that blocked the main roads in the country for eleven days in 2013.
In 2012, the government granted a bailout worth 28 billion Colombian pesos ($16 million) that provided $20,000 pesos for 125-kg bags of parchment when the internal coffee price was below 650,000. But growers deemed the bailout as an “insult.” Later that year, the government was forced to launch a bailout worth 80 billion pesos ($44 million), upping a subsidy to 60,000 pesos
from 20,000 pesos when the internal coffee price was below 650,000 pesos. In 2013, when coffee growers were still losing money, and entered into a strike, the government upped the subsidy to $145,000 for 125kg bags of parchment coffee.
The subsidy ended later that year and coffee growers returned to a profit or broke even starting in the second quarter of 2014, when the peso experienced a strong depreciation.
Writing by Diana Delgado