COLOMBIa

Diego Zamora, Director Belco Colombia

Should the quality of our coffees be linked to the international price? In Colombia, it was naively believed that there would be no coffee crisis worse than the one observed a decade and a half ago, during The Roya crisis.

The attack of this fungus on plantations was unfortunate, and throughout the coffee-growing country it had simply “catas- trophic” consequences, wiping out more than 40% of the harvest in those years.

 

The causes were as varied as they were difficult to prove: old crops, non-resistant varieties, global warming, fungi and parasites adapted and resistant to agrochemicals, excessive rainfall due to the La Niña effect, low international prices that did not allow for investment in sanitary work on the farms, among other more complex causes. All these issues together seemed to constitute “the perfect storm”, with consequences so serious that they caused the price of Colombian coffee, among other things, to rise from USD 0.02/lb. to USD 0.85/ lb. in less than a year, rollercoaster style.

 It was easy to infer that this crisis would have a negative effect on the already rare and expensive cup of Colombian coffee.

It was already common and acceptable to have cups with notes of bread, cereal, dried grass and roasted corn. A far cry from the traditional profile of sweet Colombian coffee, but it was either that or no coffee at all. The worst part was how the export sector coped with this crisis with millions of dollars in losses: they had contracts sold forward with very low spreads and had to buy with spreads up to 40 times higher. This is where hedging strategies were put to the test, to manage the risk of price variation, because this is where those who did not go bankrupt learned at least that there

Fortunately, Belco Colombia works closely with some producers who understand the concept of good long-term relationships, esteem

the concept of quality, and are convinced of the principles of sustainability, regardless of the price reality.

 

The message is that not everything should be measured in financial terms, because we have reached that point where there is an indirectly proportional relationship between price and quality.

 

This is why Belco Colombia was given the task of developing strategies so that the quality of the coffee would not depend on the international price, but would be achieved through a certain routine, that of doing things well, naturally, because it simply has to be done that way, without extra effort or cost overruns. To achieve this, we must understand, convince and act, and this is why we are present where the coffee is grown, opening our office in the city of Armenia (Quindío), in the heart of the Traditional Coffee Axis, with a modern quality laboratory, with a staff of great human and professional quality, with the Belco message for all its business partners: Where sourcing makes sense.

Well, we can now conclude that every day is a new opportunity to get more surprises, that not everything

is due and that the process of evolution is often accompanied by a focus on complexity and uncertainty.

Is there anything worse than having at the same time a pandemic, a truck strike with a total road blockage for 45 days, an increase in the exchange rate to historically high levels, an rise in sea freight due to a lack of containers world- wide, a freeze in Brazil and a consequent increase in international prices? Add to this the fact that national and international banks have increased the risk level for companies involved in the coffee trade, increased financial interest, and reduced the provision of liquidity to the industry... They have also increased internal default levels in already traded coffee deliveries, which, due to the change in the international price, has caused a shortage of more than one million bags. Could any- thing be worse? It is unclear whether I missed out on something or if we have seen it all.

Right now, it seems that the only ones who are doing very well are the coffee producers, because they are finally receiving a good price (the right price, by the way?) that finally covers their production

costs and generates a decent profit. Yet, in reality, nothing could be further from the truth. Today, the costs of producing a bag of coffee have skyrocketed due to the high cost of imported agricultural inputs, the shortage of local labor, the logical restrictions of a pandemic and the instability of prices that make it very difficult to plan things more than one month ahead. This has led most producers “to take advantage” of high prices, as these good times usually do not last long.

 Today, in Colombia, having coffee is like having a candy before entering your classroom - as soon as it is pulped, the coffee is sold immediately.

The cannibalistic behavior of the middlemen and exporters for anything named coffee has become a habit. Whether it is good, fair or bad, it is gold. It did not take long for producers to realize that if everything called coffee could be sold for a good price, they would be less likely to produce high quality coffee, which takes time and effort, requires picking ripe cherries, separating out defective beans, carefully pulping, fermenting well, washing and drying slowly... since this additional process costs more and increases the already high production costs.

 

Efficiency today means producing more volume and selling in the shortest possible time. Something similar to picking cherries of all colors, pulping and

washing without fermentation, selling on local markets without drying, is seen as an efficient protocol. It is curious that the difference today is not having healthy crops, organic processes, shade growth, reduced water use, methodical fermentation and generally good harvest and post-harvest management, but rather having good cash flow, buying wet coffee and using 60-degree Celsius drying silos to dry it quickly. In the end, what most of the market values today is fast delivery and high volumes of coffee, regardless of quality.

 

This is a difficult question to answer, but all indications are that in Colombia the key is not to identify production costs and make a decent profit, but rather to take advantage of the opportunity, as prices could well fall back below USD 1.20/lb. on the international market by tomorrow.

 The question then arises: is specialty coffee as well-valued in a low-price scenario and unattractive in a high-price scenario?

BELCO

PRIMEURS

CAFÉS

2022