Colombia coffee market cools, competition intensifies, traders reduce imports

Colombia coffee prices hit $2.37 per pound in February 2023 and fell to $1.84 per pound by October. All because Colombia coffee cultivation received many challenges, La Nina in 2022 and El Niño in 2023 affected Colombia's coffee production throughout 2023. This, coupled with global events such as the pandemic and the Russia-Ukraine war, further exacerbated supply chain disruptions, resulting in increased production costs, made worse by the devaluation of the peso, making imported farm inputs more expensive.

Colombia coffee is said to be trading at a premium of nearly $0.70 over the already-expensive New York Stock Exchange. Although some buyers will continue to buy coffee in Colombia, Colombia's reputation for producing quality coffee is guaranteed. But not all buyers will choose Colombia coffee. Colombia has long maintained a high differential price, which is largely driven by the marketing behind Colombia coffee institutions.

For decades marketing efforts such as "100% Colombia Coffee" have been driven by the Colombia National Coffee Producers Association (FNC). In recent years, FNC has spent $1.3 billion on marketing aimed at positioning Colombia coffee as an upgrade with quality.

But recent traders have also had problems, with importers facing expensive credit, rising inflation and rising operating and supply costs. As a result, buyers will think more carefully about which coffees to buy and try to find cheaper but of the same quality.

As a result, many importers and traders decided to terminate coffee contracts with Colombia, with importers reporting a decrease of nearly 50 to 60 per cent in coffee beans purchased in Colombia. Start buying the same quality coffee at lower prices and look to origins such as Peru, Guatemala, Costa Rica, Nicaragua, Mexico and El Salvador.

The good news is that, starting in the second half of 2023, Colombia peso recovery and fertilizer prices fell, Colombia coffee prices began to stabilize. And improved weather conditions are expected to increase coffee production by about 3% for the 2023/24 crop year. Recently, FNC released data showing that Colombia coffee production in January 2024 increased by 10.5% compared with the same period last year. Buyers can regain confidence in Colombia coffee and prices may be more competitive, so hopefully attract traders to continue buying Colombia coffee.