Colombia recovers from effects of coffee fungus

Coffee production in Colombia is on track to rise for the first time in five years as the country, known for its smooth arabica bean much loved by espresso aficionados, recovers from the devastating effects of coffee fungus.

Output for the first six months of the year totalled 4.9m 60kg bags, the highest since 2.007, before the outbreak of la roya, the coffee leaf rust, according to the Coffee Growers Federation in Colombia. 

Exports in the same period totalled 4.3m bags, rising 28 per cent from a year before.

Andres Valencia, chief commercial officer from the Colombian Coffee Growers Federation, said growers were reaping the benefits of the replanting programme, which had depressed production levels. 

“It has been very difficult, but this is the first year that production will rise,” Mr Valencia said. 

The country has spent about $1.5bn helping the coffee industry, including providing new trees for replanting, fungicides, fertilisers and farmers’ training.

The production recovery in one of the world’s leading quality coffee growers is likely to weigh on the arabica coffee price, which has hovered at four-year lows over the past few weeks.

A bumper crop in Brazil has been depressing arabica prices, as has the plunge in emerging market currencies, which increases the local currency return for growers, hence encouraging selling. 

Analysts said the sharp fall in the Brazilian real has been a leading driver of selling by the country’s producers.

Last month, ICE September arabica coffee hit a low of $1.771 cents a pound, the lowest since September 2.009. 

On wednesday it was fluctuating at $1.2220 a pound.

Although the virulent form of coffee rust has spread to Central American producers, arabica prices have continued to decline as the fall in the region’s production has been more than compensated by the Brazilian crop as well as the Colombian output recovery.

In Colombia, the fall in coffee prices has meant that the government has had to subsidise growers. 

With production costs at about $350 per 125kg sack of coffee compared with the domestic price of $250, the government is providing assistance of $80 a sack, Mr Valencia said.

Kona Haque at Macquarie in London forecast continued weakness in arabica coffee prices, especially with investors focusing on the Brazilian harvest, which has commenced in earnest, after some rain delays last month. 

“Although some have mentioned quality concerns due to the damp conditions, the weather forecast for july and august is very dry, which should help the harvest come along,” she said.