- Colombian coffee prices reached $2.37 per pound in February 2023, dropping to $1.84 per pound by October
- Roasters turned to alternative South American coffee origins such as Peru and Honduras
- Climate anomalies significantly contributed to Colombia’s coffee production – a sign of things to come for the global industry
AFTER A sustained period of high prices, Colombian coffee took a sharp dive in the middle of last year.
“Right now, we’re coming from a C market that in 2022 was almost $2.36 per pound. In the last year we reached the bottom margin of $1.46,” says Juan Suarez, a green coffee buyer for Nordic Approach in Latin America.
Colombia has experienced the same challenges as other coffee origins: heavy rainfall caused by La Niña in 2021 and 2022 severely impacted production throughout 2023; global events such as the Russo-Ukranian War and the pandemic have further contributed to supply chain disruptions leading to increased costs of production. As is well known, wide-scale supply-side issues have put upward pressure on global coffee prices since 2021, reaching a climax in early 2022.
According to Juan, the Colombian differential was nearly $0.70 above the already high NYSE price for a period in 2022. However, some buyers were eager to continue purchasing from Colombia – the country’s reputation of producing high-quality coffee meant that some absorbed the higher prices and assumed they were warranted.
However, not all buyers followed suit. Juan points out that Colombia has enjoyed a high differential for a long time. This has largely been driven by the marketing behind Colombian coffee.
Campaigns such as “100% Colombian coffee” and other marketing efforts have been driven by the Federación Nacional de Cafeteros (FNC) for decades. Between the 1960s and 1990s, the FNC spent $1.3 billion on marketing, and these efforts aimed to position Colombian coffee as having a historic association with quality.
However, we are now at a point where buyers are being squeezed on all fronts. Importers are battling expensive credit and recently declining coffee prices have put them in something of a liquidity trap. Similarly, roasters have now spent the last 18 months battling rising inflation, high energy prices, and other increased operational & supply costs.
As far back as late 2022, traders and roasters started looking to cut costs, but this was a common theme throughout 2023. So, against a backdrop of rising coffee prices, buyers had to think much more carefully about which coffees they were buying – and trying to get the same quality from “cheaper” origins.
As such, the volatile market conditions over the last few years have prompted buyers to explore alternative coffee origins, and many roasters and importers decided to end their Colombian contracts.
“We dropped almost 50% to 60% of all our purchasing in Colombia and we increased that 50% that we lost in Colombia by buying more coffee from Peru,” says Juan.
Indeed, other origins such as Peru, Honduras, Guatemala, Costa Rica, Mexico, Nicaragua, and El Salvador have emerged as competitors – all producing similar quality coffee at a lower price point.
This means that buyers are now able to source the same quality at a lower cost than Colombian coffee. And as buyers have become more price-sensitive, those that used to pay more for Colombian coffee have started to look elsewhere. What’s more, the “100% Colombian coffee” brand doesn’t seem to hold the same sway with buyers in this more competitive marketplace – making things more challenging.
Colombian coffee prices stabilise
In the second half of 2023, Colombian coffee differentials began to stabilise, along with a recovering Colombian peso and decreasing fertiliser prices. However, many roasters and importers have remained cautious about recommitting to long-term/large-volume Colombian contracts.
“The big exporters, cooperatives, and international corporations that really move the price and the volume here have been having to lower the differential that they are asking for their coffees,” says Vicente Mejia, founder and CEO of Clearpath Coffee.
Looking ahead, production is forecast to increase by about 3% in the 2023/24 crop year due to improving weather conditions. While buyers could begin to regain trust in Colombian coffee and prices could become more competitive again, production figures are likely to increase in other coffee-growing countries, too.
As such, the past few years of financial uncertainty may have put the spotlight on Colombia’s high prices and could be driving something of a seachange as roasters become more comfortable sourcing from elsewhere.
A more competitive landscape for Colombia to compete in
So what does this mean for roasters in 2024 and beyond? Is Colombian coffee back on the menu?
Should coffee prices continue to fall, this issue is likely to be less pronounced. However, the ICE has recently increased the differential for Colombian coffee delivered to the exchange from $0.06 to $0.10 per pound – which will deter more price-sensitive roasters.
Ultimately, with other origins from similar geography offering similar flavour profiles and broader increases in quality, things aren’t quite over yet. Even if prices do fall and roasters can afford to be less price-sensitive, it’s unlikely we’ll return to the heady heights of 2022.
So, after two years of shocks across the supply chain, price volatility, and general uncertainty, some in the Colombian coffee industry are taking this moment as a good time to take stock and re-evaluate the country’s position on the global stage.
“Colombia will have to go through a period of change on their production zones, on the way producers do things,” Vicente says. “I don’t think focusing on high-volume commodity coffee is the right path.”
“If roasters want to have more volume of Colombian coffee, they’ll need to pay a bit higher. If you’re looking for really high-quality and specialty, then Colombia continues to be a very good option with very innovative coffees.”
Either way, two or three challenging years aren’t going to eradicate Colombia’s reputation for producing high-quality coffee. However, what they have done is lay the foundations for other origins to catch up. Whether or not things will return to how they were remains to be seen – and only time will tell.
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