Colombia coffee federation calls for $2 floor for prices

BOGOTA, July 2 (Reuters) - Colombia, the world’s leading grower of washed Arabica coffee, called on Tuesday for an international base price of $2 per pound so that producers can have a guaranteed income that would prevent farmers abandoning the sector.

Colombian coffee producers have faced a crisis in recent months due to low international prices, prompting the government to earmark $79.5 million for subsidies, debt relief for farmers and the renewal of coffee plantations.

“Is it fair to trade when someone buys your product below the cost of production?” said the head of the National Federation of Coffee Growers, Roberto Vélez, at a fair trade conference in Bonn, Germany.

Velez did not detail how the floor of $2 per pound for coffee could be achieved. Colombia is the world’s third-largest producer of coffee after Brazil and Vietnam.

According to a statement from the National Federation of Coffee Growers, Vélez said the international price of coffee fell to 88 cents per pound in recent days, the lowest in more than a decade, putting at risk cultivation in many parts of the world.

A pound of coffee on the New York exchange closed on Tuesday at $1.09 per pound.

In February, Vélez raised a possible decoupling of high quality Arabica production, such as Colombia’s, from the New York reference price in an effort to ensure prices remained above production costs.

However, coffee exporters and traders said any such move could send buyers looking for other, cheaper suppliers.

The domestic price currently received by Colombian farmers for each sack of 125 kilos is 815,000 pesos ($254), a price that barely covers production costs estimated at 780,000 pesos ($243), according to producers. In recent months, the price hovered below production costs.

In the last 18 months, Colombia lost 400,000 hectares of coffee plantations - or roughly one third of the land under cultivation - as farmers abandoned the industry due to low prices, the association said.

The country now has 880,000 hectares on which some 540,000 families depend.

Nonetheless, Colombia’s coffee federation expects a harvest of 14 million 60-kilo bags this year, narrowly above the 13.6 million bags of last year, as the renovation of plantations and increased supplies of fertilizer have boosted productivity.

1 dollar = 3,205.67 pesos (Reporting by Luis Jaime Acosta Editing by Daniel Flynn and Lisa Shumaker)