How Covid Is Affecting Coffee Producers In Colombia (Updated June 15th)

Last week we spoke with our farming partner, Miguel Fajardo, for an update on how, demand, prices and his outlook on the future of Colombian specialty coffee have evolved since the beginning of the pandemic. 

6 weeks ago the BBC ran a story with Miguel, which, focused on the impact of reduced demand for specialty grade coffee in Colombia. As wholesale trade of specialty coffee trade dried up in the UK the article focussed on the financial impact and uncertainty faced by producing communities

See the interview below for an update on the current state of coffee in Colombia:  

How is Colombia, as a country, dealing/ responding to Covid-19?

Colombia seems to be dealing fairly well, relatively speaking, with Covid-19 and we're still in mandatory isolation/lockdown. As you can imagine, the spread of the virus is concentrated around the cities but the number of new cases identified is about 1000 a day at the moment or around 48,000 across the country. 

It's similar to Europe where the government is focussing on isolation to prevent spread and ways to support small businesses. Unfortunately, we have a lot of people who were not 'legally' employed and are therefore falling through the gaps. 

There are pockets of the economy that are coming back to some form of normality but there are a lot of unemployed people and the prevailing sense is a feeling of uncertainty. 

 

How are lockdowns around the world impacting the demand for specialty grade Colombian coffee?  

The demand for coffee has stalled for the last few months and for the moment we have no new orders. We'd usually have standing recurring orders for coffee but these have all been postponed for the time being. 

We have begun to see an increased interest in micro-lot options which might reflect roasters facing decreased wholesale demand for espresso roasts/ blends and increased interest in single origins and filter brewing coffees for consumption in the home. 

This week we started to send samples to clients again and so are hoping that orders start to pick up in the coming weeks as more places re-open. 

Is decreased demand having any impact on prices that farmers received for Colombian coffees? 

The internal price of coffee in Colombia has dipped to 950.000 COP/ Carga (equivalent to £1.6/kg). As I mentioned our contracts for standing orders have been postponed (luckily not canceled), so we're not buying coffee from other producers at the moment. The contracts we did have were luckily fulfilled before the price dip at around 1300000 COP/ Carga when the Colombian peso was a little stronger against the USD. 

if we suddenly needed to source coffee again we'd still buy at our promised premium above the local commodity market price, which is part of our Red Association Programme. 

 

How are farmers responding (if at all) to lower prices?

For the moment there is still demand for commodity coffee and the price isn't so bad that farmers can't survive. That is - it's a lower price but it's not dramatically changing the livelihoods. 

That being said there has been a drop of approximately 25% in commodity prices and, as I say, specialty grade, which is where producers have opportunity to receive price premiums has completely stalled. 

 

Last time we spoke you were uncertain/ scared about the future. How are you feeling now? 

I think things will slowly progress back to some kind of normality. We have seen more interest recently from buyers who represent markets that are returning to more normal trading. 

We have a 'shy' sense that things are heading in the right direction but we also understand that we are far from a 'normal' scenario as we used to know it and regular volume won't start flowing again that easily. 

As I said before the internal market for commodity coffee still exists (and for the time being is manageable) so our partners have continued to produce and sell on local markets at a reduced rate. 

The big concern is that we will need to rely on the commodity market in the long term (if the specialty demand doesn't pick up) which would compromise the what we've been building with producer relationships, buyers, and consumers. It would be difficult to go back to that type of uncertainty. 

At the time of the BBC interview 6 weeks ago the commodity price of coffee in Colombia was 1,250,000 COP/ carga and today it is 950,000. For reference the cost of production in Colombia ranges between 750,000 COP/carga (best case) and about 850,000 in other areas. That's a gross margin currently for farmers of somewhere between 16 and 33 pence per /kg so you can see how if the price keeps dropping we enter a scenario where the price of coffee is the same, if not lower, than what it costs farmers to produce.

At the moment that day is looking like it's not that far away which is why we hope things go back to normal as soon as possible. 

 

 


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