Colombian cannon defaults, leading to a further rise in the price of Arabica coffee

Colombian coffee production declined under the influence of La Nina

According to a report by STiR Tea & Coffee, the world's leading tea and coffee industry magazine, on October 4th, Colombia's coffee harvest in the 2020-2021 cycle was lower than expected due to La Nina climate problems, and the expected output was similar to the 13.866 million bags in the 2018-19 cycle, but after being severely damaged by extreme weather from June to July this year. Colombia's National Coffee producers Association (Fedecafe) says production can still reach 13.5 million bags. However, today's total production is expected to be 13 million bags of coffee (60 kg / bag).

Fedecafe leader Roberto Velez said in August that due to La Nina's direct impact on Colombia, the official forecast for the 2020-21 cycle production was reduced to 1300 to 13.5 million bags. Excessive rainfall and short sunshine caused by La Nina have led to a decline in coffee production in Colombia during the mid-harvest season, which begins in late March or early April and lasts until August.

In early September, Fedecafe reported that coffee production in Colombia fell 16% in August, to 915000 bags from 1.091 million bags in August last year. Total production in the past 12 months fell 7 per cent to 13.2 million bags from 14.2 million bags last year. But in the first 11 months of the 2020-21 cycle, production fell by 7 per cent from September to August, from 13.1 million bags to 12.2 million bags. The data for the 2019-20 cycle show. The output in September last year was 995000 bags, which continued to show a downward trend.

As for Colombia's production in the 2021-22 cycle, it is still not optimistic, and the local meteorological department predicts that La Nina will return later in October, which will have an impact on the harvest of the new season.

Colombian growers default

Colombian coffee growers may not be able to deliver as many as 1 million bags of coffee beans this year, accounting for about 10 percent of the country's total coffee production, causing exporters, traders and roasters to face huge losses, Reuters reported on Oct. 12. Arabica futures closed at 213.15 cents on October 12.

As Brazil has been hit by bad weather, its coffee production has fallen sharply, and global coffee prices have soared 55% this year. Colombian growers who signed up at a time when the price of coffee was much lower want to renew the agreement and complete the sale at a higher price.

An employee of the International Agricultural Trading Company said that in Colombia, traders defaulted and the price of coffee could rise to 300 cents per pound if the drought in Brazil persists, which will cause more serious chaos.

Colombia's delivery default may further exacerbate the surge in coffee prices, but this is only a temporary problem. Coffee growers also say they will deliver the goods later this year or next year, but buyers prefer to directly default rather than extend the delivery period. If there is still no delivery next year, the price will rise further, and the buyer may face greater losses.

Several global traders face losses of between $8 million and $10 million, according to a senior trader at a global trading company. Even FNC, which accounts for 20 per cent of Colombia's annual coffee exports, faces huge losses.

FNC leader Roberto Velez confirmed to Reuters that Colombia is facing a general default and that almost all Colombian exporters are suffering as a result of default. When the grower defaults and fails to deliver, the whole industry chain falls into the situation of loss.

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