Current State of Colombian Coffee Industry_Colombian Coffee Flavor Characteristics_Colombian Coffee Price

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Colombian Coffee Production Update

Colombia's coffee production has remained strong due to new coffee trees reaching their peak production and favorable weather conditions. The 2016/17 production estimate has been revised to 14.5 million bags (60kg each), 3.6% higher than the previous estimate of 14.0 million bags. If weather conditions remain normal, production is expected to increase slightly to 14.6 million bags in 2017/18.

Executive Summary

Production for 2016/17 (October 2016 - September 2017) is estimated at 14.5 million bags, higher than the previously estimated 14.0 million bags. If weather conditions remain normal, production for 2017/18 is expected to increase slightly to 14.6 million bags. In 2016, the National Federation of Coffee Growers of Colombia estimated the average yield per hectare at 17.8 bags, 29% higher than the average of 13.8 bags over the past 10 years. This is a direct result of the renovation program, which reduced the average age of coffee trees from 15 to 7 years and increased planting density. The rust-resistant variety renovation program and favorable weather conditions have kept production strong during the first 7 months of 2016/17, with a year-on-year increase of 5.1%.

Due to increased production, exports for 2016/17 have been revised to 13.1 million bags, and exports for 2017/18 are expected to increase slightly to 13.2 million bags.

Commodity Overview

Product: Coffee, green beans

Production

Thanks to the tremendous success of the rust-resistant coffee variety renovation program and favorable weather conditions, Colombia's coffee production has reached record levels since the early 1990s. The 2016/17 production estimate has been revised to 14.5 million bags (60kg each), 3.6% higher than the previously estimated 14.0 million bags. The renovation program and favorable weather conditions have maintained strong coffee production. Additionally, fertilizer incentives provided by the Colombian government and the National Federation of Coffee Growers to coffee farms affected by drought in 2015 will boost production. Production for 2017/18 is expected to increase to 14.6 million bags, assuming stable recovery and normal weather conditions.

The map below shows Colombia's coffee growing regions. Colombia has unique geography and topography, with three north-south mountain ranges creating diverse microclimates and ideal conditions for coffee cultivation. Additionally, Colombia's proximity to the equator provides sufficient growing seasons, allowing coffee to be harvested almost year-round. Two harvest peaks occur between the two dry and wet seasons of the calendar year.

The average size of Colombian coffee farms is 4.5 hectares. The National Federation of Coffee Growers estimates that Colombia has 560,000 coffee farming families, with small farmers cultivating less than 5 hectares contributing 69% of the national production. Colombia has 940,000 hectares of coffee cultivation area, but only 780,000 hectares use technological crops, meaning only partial improvements in coffee varieties, such as rust-resistant trees, dense plantations, and trees younger than 12 years. The National Federation of Coffee Growers notes that 74% of coffee growing areas now plant rust-resistant trees, compared to 35% in 2010.

Despite production recovery, agricultural labor shortages and increased minimum wage standards have raised production costs for medium and large-scale growers, mainly concentrated in the central region. However, the flowering period and first harvest for 2017/18 have been more dispersed than in previous years, which will distribute labor demand and reduce pressure on high wages. The National Federation of Coffee Growers estimates the average production cost per 125kg bag at 600,000 Colombian Pesos (COP) ($207).

In December 2016, domestic coffee prices reached historical highs. However, due to the recovery of the Colombian Peso and lower international coffee prices, prices have shown a downward trend in 2017. The average domestic monthly price for the first 4 months of 2017 reached 849,369 Colombian Pesos per 125kg bag, a year-on-year increase of 8.5%.

The chart below shows the monthly domestic prices paid to growers per bag. For reference, the red dotted line indicates the trigger price for the farmer income (PIC) protection subsidy program.

Consumption

Driven by the increasing number of coffee shops catering to young professionals and new coffee product innovations, domestic consumption for 2016/17 is estimated to reach 1.6 million bags, with a further increase to 1.65 million bags expected in 2017/18.

The growing number of Juan Valdez stores (consumer-facing coffee specialty shops offering high-quality or specialty coffee) has boosted local coffee consumption. Juan Valdez is the leading brand in the coffee shop market with a 22.6% market share, followed by OMA (12.5%) and McCafé (4.6%). Illy, Segafredo, Café Tostion, and Starbucks also hold market shares. Starbucks entered the Colombian market in 2014, and although sales trail behind Juan Valdez and OMA, its growth rate reached 19.4% in 2016, higher than other competitors (Juan Valdez at 14.6%, OMA at 11.4%, and McCafé at 10.4%).

Trade

The latest forecast for 2016/17 exports is 13.1 million bags, with the revised export figures increasing due to higher production. Exports for 2017/18 are expected to increase slightly further to 13.2 million bags. Since 2013, exports have increased significantly as production recovered. The United States is the most important export destination for Colombian coffee, importing 40% of Colombia's total exports, followed by the European Union, Japan, and Canada.

As part of quality differentiation and improvement policies, Colombia continues to increase exports of high-quality coffee to meet cupping and grading certification expectations and obtain more added value. Specialty coffee exports account for nearly 40% of Colombia's total coffee exports. Certified Colombian specialty coffees are in high demand, with organic coffees commanding significant premiums, typically higher than traditional coffee exports. Coffees from specific regions of Colombia, such as the southern producing regions of Huila, Cauca, and Nariño, have gained increasing international recognition for their cup quality. Colombian specialty coffee producers produce coffee under numerous international programs offering Fair Trade and organic certifications, such as USDA, UTZ Certified, 4C, and Rainforest Alliance. Agreements between growers and intermediaries, including the National Federation of Coffee Growers, ensure quality levels that meet foreign certification standards and buyer/consumer expectations.

To promote direct trade and increase income for small-scale producers, the National Federation of Coffee Growers has launched an initiative allowing registered exporters to make small shipments of coffee. Up to 60kg of green coffee beans, roasted coffee, instant coffee, and coffee extracts can be transported by authorized private transportation companies.

Despite increased coffee production, the El Niño weather phenomenon has increased the impact of coffee borer insects on coffee quality. Although Colombia claims to export only the best coffee beans, in May 2016, the National Federation of Coffee Growers modified export standards to help growers sell lower-quality coffee beans in line with international standards. Additionally, increased quantities of inferior beans have led to increased instant coffee exports.

Stocks

There is no government or National Federation of Coffee Growers policy supporting large-scale carryover stocks of coffee. Considering expanded production and coffee being unable to be transported from production areas due to truck driver strikes, beginning stocks for 2016/17 are estimated at a total of 1.04 million bags. Beginning stocks for 2017/18 have dropped to 981,000 bags. Given the lack of policy incentives and infrastructure to maintain long-term stocks, ending stocks for 2017/18 are expected to drop to 891,000 bags.

Recommended Colombian Coffee Brands

FrontStreet Coffee's roasted Colombian coffee beans offer excellent guarantees in both brand and quality. More importantly, they provide exceptional value for money - a 227-gram box costs only 95 yuan. Calculating at 15 grams of coffee powder per cup, one package can make 15 cups of coffee, with each cup costing only about 6 yuan. Compared to the tens of yuan per cup prices in coffee shops, this is truly a conscientious recommendation.

FrontStreet Coffee: A Guangzhou-based roastery with a small shop but diverse bean varieties, where you can find both famous and lesser-known beans. They also provide online store services. https://shop104210103.taobao.com

Important Notice :

前街咖啡 FrontStreet Coffee has moved to new addredd:

FrontStreet Coffee Address: 315,Donghua East Road,GuangZhou

Tel:020 38364473