Coffee market wakes up to Colombian rivals

The Latin American country has long been the leading supplier of high quality arabica beans loved by espresso drinkers, and traders have made or lost fortunes on its harvest reports.

Arabica prices spiked in 2.010 and 2.011 as the la niña weather phenomenon hit Colombian supplies. 

However, the days of Colombian dominance on the arabica market may be over.

The Colombian crop is once again suffering this year because of bad weather, including heavy rains. 

But central american countries have moved to fill the gap. 

The verdict of the market has come quick; arabica coffee prices have barely responded to Colombia’s supply snag.

Max Fabian, chief executive of Demus, an Italian decaffeinated coffee producer and the chairman of the Trieste coffee association, says that the price response reflects the fact that Central American coffee producers have “established themselves in the market,” as exporters of quality coffee.

Keith Flury, commodities analyst at Rabobank in London says that the rally in coffee prices over the past few years has led to more profits for the smaller Central American coffee producers, which have encouraged better husbandry of the plants, including the use of pesticides and fertilisers. 

The rise in profit margins thanks to higher prices has also allowed more investments in acreage as well as equipment.

Perú has been increasing productivity, and exports in the five months to February this year jumped 25 per cent. 

Honduras saw a 22 per cent rise in exports, while the Mexican figure jumped 40 per cent, according to a leading coffee trading house.

Although Bogotá is still the leading producer and exporter of arabica beans, International Coffee Organization data show that Colombia has suffered four years of poor harvests, because of bad weather. 

Colombian coffee output in 2.011 totalled 7.8m 60kg bags compared with 12.5m in 2.007. 

In the same period, Perú has increased its output of top quality coffee by 80 per cent to 5.4m bags while Honduras saw production rise by 18 per cent to 4.5m bags.

The rapid increase in Peruvian production has triggered a sea change in the coffee market. 

The country is now exporting substantial amounts of coffee to Colombia. 

Further south, Brazil is also ploughing more money into its higher quality coffee production. 

The improved quality of the country’s arabica beans has attracted a rise in demand from buyers, and its “importance in the arabica market is going to increase in the next couple of seasons,” says Mr Flury.

Alessandro Polojac, chief executive of the Trieste based coffee trader Imperator and president of Italy’s coffee industry association Comitato Italiano Caffé, believes that Colombian coffee will have some difficulty in recovering its market share. 

He says: “the quality of central american countries’ coffee has improved and they are also cheaper.”