BOGOTA (Reuters) - Colombia will seek quality premiums of 40 cents per lb for its coffee in 2020, up from about 30 cents now, hoping to generate sufficient profits for the country’s farmers, the finance minister said on Wednesday.
Growers in the Andean country, the world’s top producer of washed arabica, have weathered two years of crisis as low international prices sent farmers’ incomes below production costs.
“The basis is quality. Colombians are known for quality coffee and that is what we have seek,” Finance Minister Alberto Carrasquilla told journalists on the sidelines of the growers’ federation’s annual conference.
“Right now we are at 30 (cents of premium), we came from 20 and we need to look for a permanent quality premium in our product along the lines of 40 cents per lb.,” Carrasquilla said.
Quality premiums recognize specific characteristics in coffee like aroma, origin and production method.
Carrasquilla did not say how Colombia would go about boosting the quality premium so sharply. Improving overall quality is difficult because of variations in terrain, farmer education and weather.
This year, the local growers’ federation proposed producer countries untether their prices from the New York exchange, in an effort to sell coffee more directly to boost earnings.. The federation also runs annual tree replacement and grower education programs, hoping younger and less disease-prone plants and more expertise will help farmers improve crop quality.
The domestic price per 125 kilo shipment was $289 on Tuesday, enough to cover production costs of about $220, some 780,000 Colombian pesos.
Prices on the New York exchange were $1.23 per lb. on Tuesday.
The increasing use of mechanization and other new technologies in Brazil and Vietnam have led to productivity leaps that far outstrip rivals like Colombia, where many farms are set on steep Andean hillsides that make mechanization difficult and keep costs high.
Dismal prices have led many Colombian farmers to consider selling up or switching to other crops like the coveted Hass avocado.
Colombia is expected to produce about 14 million bags of coffee this year and a similar figure in 2020.
Reporting by Luis Jaime Acosta,; Writing by Julia Symmes Cobb; Editing by David Gregorio