Colombia hikes coffee subsidies, calls for coffee strike to end

Sat Mar 2, 2013 7:48pm EST

* Striking farmers have been blocking roads since Monday

* Strong local currency, low output have hurt growers

By Diana Delgado

BOGOTA, March 2 (Reuters) - Colombia's government raised a subsidy to coffee farmers on Saturday and called for them to end a strike, but farm leaders said they will continue protesting and blocking roads because they want buyers to pay a minimum price for beans.

Coffee growers in Colombia, the world's top producer of high-quality Arabica beans, are demanding more help from the government after being hit by years of poor weather, crop disease and a strong currency.

They have been blocking key highways and secondary roads since Monday, especially in the coffee producing provinces of Huila and Cauca.

"There is no reason to continue with the strike and blockages. This is a solution with a strong financial appeal," said Luis Genaro Munoz, head of the coffee growers federation after meeting government officials to discuss their demands.

The government has offered to increase a subsidy to 115,000 pesos from 60,000 pesos previously for a 125-kg sack of parchment coffee for small producers when the internal coffee price is below 650,000 pesos. The subsidy also increases to 95,000 pesos from 60,000 previously for big land owners.

The measure will become effective on Sunday and will run until Dec. 31, said Finance Minister Mauricio Cardenas.

"I invite coffee growers from all over the country to lift the strike immediately. ... The government is doing an enormous effort to provide this aid. I believe the strike will end," Cardenas said.

But strike leaders said protests will continue until the government agrees to set a minimum price of 650,000 pesos for 125 kilos of parchment coffee regardless of foreign exchange and international coffee prices.

"People are furious. We will continue blocking roads," said Ermison Sterling, a coffee grower who has been leading blockages in the Huila region.

BELOW PRODUCTION COSTS

Coffee growers are now getting around 521,000 Colombian pesos ($288) for 125-kg bags while production costs are 650,000 pesos for an efficient grower and as much as 700,000 pesos for regular ones, producers and exporters said.

Meanwhile, truck drivers went on strike on Saturday to demand lower fuel prices, which would further hamper transportation of goods in Colombia and could lead to food or fuel shortages in some big cities.

"The decision has already been made, there's no way back," said Pedro Aguilar, head of the Colombian Truckers Association, adding that some 340,000 drivers will join the strike.

Workers at the country's largest coal miner, Cerrejon, have also been on strike for nearly a month.

The labor disputes are putting pressure on President Juan Manuel Santos, who is taking the biggest gamble of his career by engaging in peace talks with the Revolutionary Armed Forces of Colombia (FARC), Latin America's largest guerrilla group.

A poll released earlier this week showed his popularity is at its lowest level since he took office in 2010, in part because many believe the FARC are gaining ground.

Colombia's coffee farmers have seen their livelihoods shrink in recent years as the cost of fertilizers and other imports needed to produce coffee has chipped away at earnings, already reduced by low bean prices and the country's strong currency.

Growers have also suffered since 2009 from the impact of torrential rains that knocked beans from trees and brought on disease that wiped out production.

Colombia, a top producer worldwide after Brazil, Vietnam and Indonesia, last year reported its smallest crop in three decades at 7.74 million 60-kg sacks. If the dispute is not resolved quickly, it could dash the country's hopes of increasing output to 10 million bags this year. (Reporting by Diana Delgado; Writing by Eduardo Garcia; Editing by Todd Eastham)