Why Are Colombian Coffee Prices Declining?

Colombian coffee prices dropped from $2.37 per pound in February 2023 to $1.84 by October. La Niña shifting into El Niño hurt production, the pandemic and the Russia-Ukraine war disrupted supply chains, and peso depreciation raised farm input costs, while expensive credit pushed some traders to cut purchases of Colombian beans by 50 to 60 percent.

Buyers turned to lower-priced origins such as Peru and Guatemala, though Colombia's quality reputation keeps some demand. What is colombian coffee worth to the market also rests on marketing: the National Federation of Coffee Growers has invested $1.3 billion behind the 100% Colombian Coffee campaigns. Late 2023 brought a peso rebound and better weather, with 2023/24 output expected to rise about 3 percent.

In 2023, Colombian coffee prices experienced significant volatility, falling from $2.37 per pound in February to $1.84 in October. The alternating effects of La Niña and El Niño impacted production, while the pandemic and the Russia-Ukraine war exacerbated supply chain disruptions, and the depreciation of the peso drove up farm input costs. Meanwhile, importers faced pressures such as expensive credit and rising inflation, with some traders reducing their purchases of Colombian coffee beans by 50% to 60%, turning to lower-priced alternative origins such as Peru and Guatemala. However, in the second half of 2023, the peso rebounded, fertilizer prices fell, weather improved, and production for the 2023/24 crop year is expected to increase by about 3%. In January 2024, production grew by 10.5% year-on-year, and market confidence is expected to recover.

The price of Colombian coffee reached $2.37 per pound in February 2023, but by October it had fallen back to $1.84 per pound. This fluctuation mainly stemmed from multiple challenges faced by Colombian coffee growers: the La Niña phenomenon that continued from 2022 into the El Niño phenomenon of 2023 dealt a blow to coffee production throughout the year. At the same time, global events such as the pandemic and the Russia-Ukraine war further disrupted supply chains and pushed up production costs, while the depreciation of the peso made matters worse by making imported farm supplies more expensive.

There are reports that the differential for Colombian coffee has already risen to nearly $0.7 above the already elevated New York Stock Exchange price. Although some buyers will continue to purchase from Colombia because the country's reputation for producing high-quality coffee and its quality assurance are attractive, not all buyers will insist on choosing Colombian coffee. For a long time, Colombian coffee has maintained a relatively high differential, largely thanks to the marketing efforts behind the scenes by Colombian coffee institutions.

For decades, marketing campaigns such as "100% Colombian Coffee" have been led by the National Federation of Coffee Growers of Colombia (FNC). In recent years, the FNC has invested $1.3 billion in marketing, aiming to position Colombian coffee as a symbol of improved quality.

However, traders have also faced many difficulties recently: importers are bearing expensive credit, rising inflation, and continuously increasing operating and supply costs. Therefore, against the backdrop of rising coffee prices, buyers will consider more carefully which coffees to purchase and try to find lower-priced origins of comparable quality.

For this reason, many importers and traders decided to terminate their coffee contracts with Colombia. Some importers said they reduced their purchases of coffee beans from Colombia by nearly 50% to 60%. They began buying coffee of equivalent quality at lower prices, turning their attention to origins such as Peru, Guatemala, Costa Rica, Nicaragua, Mexico, and El Salvador.

On the positive side, starting in the second half of 2023, the rebound of the Colombian peso and the decline in fertilizer prices caused Colombian coffee prices to begin stabilizing. Coupled with improved weather conditions, coffee production for the 2023/24 crop year is expected to increase by about 3%. Recently, the FNC released data showing that Colombia's coffee production in January 2024 increased by 10.5% compared with the same period last year.

Therefore, buyers can re-establish trust in Colombian coffee, and prices may become more competitive, which it is hoped will attract traders to continue choosing to purchase Colombian coffee. Front Street Coffee will also continue to follow the market dynamics of Colombian coffee and bring the latest information to enthusiasts.

The above content is compiled by CoffeeHunters, a coffee news website.