Bogota, Nov 30 (Reuters) - Major coffee grower Colombia must decide whether to stick with linking its price to New York Stock Exchange contracts in 2023 or set a fixed price, an industry leader said on Wednesday, raising the possibility of the country maximizing export revenue.
Strong Brazilian production is likely to create a global surplus and drive down the New York price next year, Roberto Velez, manager of Colombia’s National Federation of Coffee Growers, told a news conference.
“Bigger harvests in Brazil are associated with lower prices,” he said.
A nationally set fixed price could conceivably be higher than one that follows current practice in being linked to New York, but Velez did not explain how Colombia could insist on buyers accepting it.
Coffee closed on the New York Stock Exchange on Wednesday at $1.67 a pound, down from this year’s peak of $2.50. Colombian growers receive a quality premium of 60 to 70 cents on the New York price.
Colombia is the leading supplier of washed arabica coffee. The federation sees production reaching almost 12 million 60-kg (132-lb.) bags in 2022, the least in eight years because of bad weather.
“We are coming from a deficit of almost seven million bags (globally in 2022) ... to a surplus that will most likely be produced in the next harvest in Brazil,” Velez added. He expected Brazil’s next harvest to amount to between 55 million and 65 million bags.
“Maybe we are closing a cycle, the cycle of high prices,” Velez noted.
Velez proposed in February 2019 the possibility of selling Colombia’s coffee harvest at a price that covered production costs plus a profit margin, without taking into account the New York reference price.
Colombia, the world’s third-largest coffee producer, after Brazil and Vietnam, could begin to return to normal production levels early next year when rain subsides, Velez said. (Reporting by Luis Jaime Acosta; Writing by Valentine Hilaire; Editing by Bradley Perrett)
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