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Worldcrunch

Climate Change, Killer Bugs, Asian Upstarts: Colombia Losing Edge In Coffee Market

Article illustrative image Partner logo A coffee farmer inspects his crop in Colombia's southwestern Cauca department

BOGOTA - According to legend, Colombia is blessed with coffee thanks to sinners.

The legend comes from Francisco Romero, the priest of Salazar de las Palmas in the Santander province, who had a strange penance for residents who confessed their sins: to sow coffee seeds. The priest wasn’t naive – it was yet another push for the cultivation of coffee, which later expanded throughout Colombia and became the pillar of the national economy.

Until the 1980s, Colombia boasted of being the second largest coffee producer in the world, and the country’s ‘brand’ seemed inseparable from the popularity of coffee. "That’s how Colombia managed to position itself as the "coffee country" of the region. Even now, that’s how Colombia is known abroad," explained Carlos Rojas Gaitan, the executive president of the Colombian Association of Coffee Exporters.

Rooted in the Colombian peasant culture, the extensive plantations in the Andean hills contributed to growth in the GDP, a positive trade balance, jobs and monetary stability. But at the end of the 1980s things started to change for the worse.

Between 1989 and 2011, the country lost seven percentage points of its market share in the world coffee market, while Brazilian coffee producers increased exports and new actors, like Vietnam and Indonesia entered the market and knocked Colombia off its coffee throne.

"Right now, we are fourth in the world in terms of production of coffee," says Andres Guerrero, a professor at the University of the Andes in Colombia. "There is a change in the market and in the coffee context. Colombia should pay attention to that."

Increased competition internationally is not the only reason that Colombian coffee producers have been suffering. Domestic headaches have also been multiplying. Price instability has affected the harvests of small farmers, and with it, their means of survival. Government assistance has proven insufficient, and a depression has spread throughout the community of coffee farmers.

At the beginning of October 2012, around 50,000 coffee farmers in Colombia joined protest marches to protest the coffee industry’s problems and the government’s indifference.

According to them, this is the worst time for coffee production in Colombia in the past 36 years. "We had a first crisis 10 years ago, and now we are starting to have another one that is really bad," says Juan Pablo Echeverry, the manager of a coffee plantation in the city of Manizales, to the south of Bogota.

The harvest in 2011 was the smallest in 30 years. Only 7.8 million 60-kilo sacks where harvested, mostly due to heavy rains in the main coffee-producing regions. Price volatility made the situation even worse. Coffee prices started going up in 2004 and reached a peak in 2011, when they reached the prices of the 1970s. Since then prices have been dropping.

Plagues and climate change


In light of this, the Colombian Federation of Coffee Producers has launched a price protection program, an insurance that aims to protect incomes and reduce risks. "Colombia has 560,000 coffee producers. We came up with this idea to protect these farmers and create a financial mechanism that allows them to protect themselves," explains Luis Fernando Samper, the head of communications and marketing for the Federation of Coffee Producers.

Will this be enough to weather the crisis? In addition to the price volatility and the macroeconomic circumstances, there are problems related to climate change, which have caused increased plagues and epidemics. "The red spider and insect larva represent majors problems for us. Now we have to harvest all year, and fumigate. That means increased costs," explains Juan Pablo Echeverry.

The Center for Coffee Research is working on a project to map the coffee genome and give the plant more defenses against its natural enemies. In addition, they are working on ways that coffee producers can prepare for the changes associated with climate change.

However, the coffee harvests between January and September 2012 in Colombia were 3% less than the same period in 2011. A report by the International Coffee Organization said that, although Colombian coffee production is improving, "getting back to the production levels of the beginning of the millennium will take time."

The coffee industry knows that, and is preparing for a couple of difficult years. Some say that the most important thing is to promote institutional reform that will strengthen the industry. "The future of coffee production depends on what happens now in the coffee guilds; the strategies that they design not only to survive the crisis, but also to maintain a strong union," says Alfonso Gomez, an economics professor at the EAFIT university in Colombia.

Colombia is not going to stop being a coffee country. But returning to the good times will depend on public policies and what the producers’ associations do to confront the situation. Because going back to tricks of faith, like Father Romero did in the middle of the 19th century, does not seem like a very good idea.

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About this article source Website: http://www.americaeconomia.com/

America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

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