February 27, 2019 / 4:04 PM / 6 months ago

Colombia to examine selling coffee at its own price, ignoring New York market

BOGOTA (Reuters) - Colombia, the world’s top producer of washed arabica, will look into selling its harvest at a price which covers production costs, without being tied to the New York market price, the national coffee federation said on Tuesday.

A coffee grower selects coffee fruits in Chinchina, Colombia November 22, 2018. REUTERS/Luisa Gonzalez

The federation has long sounded the alarm about low prices, which leave many growers operating at a loss, making the case to large coffee buyers that they should ensure producers make a profit and asking the government for subsidies.

Farmers need to make 760,000 pesos (about $240) per 125 kg (275 pounds) shipment on the internal market to meet production costs, the federation has said. Prices on the internal market were 690,000 pesos per shipment on Monday.

“The time has come to start to think in a different way and sever the price of Colombian coffee from the softs market in New York and get to a point when we have production costs plus profit,” federation head Roberto Velez told reporters.

“If you want it you pay the price, if you don’t want it you don’t buy Colombian coffee, because otherwise Colombian coffee isn’t viable,” Velez said.

Colombian growers “can’t spend their whole lives begging because the industry is getting rich off what they produce,” he said.

The New York market is too tied to Brazil’s production, Velez said, and does not take into account growers in Colombia or Central America.

Prices have hovered close to $1 per pound on the New York market so far in 2019. Colombia would set its prices between $1.40 and $1.50 per pound, Velez said.

The proposal will need the backing of coffee growers, other arabica producers from other countries and buyers before it goes ahead, the federation said in a statement.

The government will reactivate more than $30 million in aid for growers to help them weather the low prices, Finance Minister Alberto Carrasquilla said in the statement.

The funds were approved last year but were not fully spent because of a brief price recovery. When the price is below 700,000 per shipment, growers receive a subsidy of $9.60 per shipment.

The agriculture minister said in the statement he would work with Colombia’s agrarian bank to find debt re-payment alternatives for farmers struggling to pay back loans amid the low prices.

Colombia produced 13.6 million 60-kg bags of washed arabica last year, down 4.5 percent from 14.2 million in 2017, but dry El Niño weather is expected to help the crop recover this year.

Reporting by Luis Jaime Acosta; writing by Julia Symmes Cobb; editing by Helen Murphy and Grant McCool

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