Logo of Phnom Penh Post newspaper Phnom Penh Post - Colombia wants to break its coffee free from NYSE

Colombia wants to break its coffee free from NYSE

Content image - Phnom Penh Post
Colombia is the third largest coffee producer in the world, after Brazil and Vietnam. JOAQUIN SARMIENTO/AFP

Colombia wants to break its coffee free from NYSE

COLOMBIA’S coffee may be known as the best in the world, but that doesn’t mean the South American country can ask top dollar for it.

Coffee prices are regulated by the New York Stock Exchange (NYSE), which growers blame for the crash that has devastated their industry.

“We want to offer our coffee at a fair price, which covers the production costs and a reasonable profit,” said National Coffee Growers Federation [FNC] manager Jose Sierra.

The problem is that being tied to a stock exchange not only restricts the ability to set your own prices, but also leaves you at the mercy of traders.

“Stock market speculators who buy coffee securities . . . can dump them the moment they like, which then sends the price tumbling to the floor,” said Sierra.

“That’s why we want to stop using the New York price as a reference.”

Colombia is the third largest coffee producer in the world, after Brazil and Vietnam, and number one amongst those known for their high quality soft beans.

The international reference price for coffee has dropped from a high of $1.5 per pound in 2016 to less than a dollar in February.

And while Colombian coffee has a 20-cent premium due to its high quality, that’s not enough.

‘Dramatic situation’

“I’ve never seen such a dramatic situation as this,” said Sierra, who has been FNC’s manager for 25 years.

“They’re paying us 640,000 pesos [$206.29] for a 125kg shipment of coffee and the production costs are 790,000 pesos,” said Sierra.

That’s a loss of $48.35 for every transaction.

The price crash is also a result of surplus. According to the International Coffee Organisation (OIC), production – measured in 60kg bags – in 2018-2019 should hit 167 million bags compared to the expected worldwide consumption of 165 million.

At $1.20 per pound [$2.65 per kg] the current price for Colombian coffee is less than the $1.40 it fetched in 1983, said Fernando Morales-De La Cruz, from the Cafe for Change organisation campaigning for a greater distribution of coffee profits going to those working in its production.

He says that a pound of coffee produces 55 cups (121 cups per kg), but while “the consumer pays $1-$3, depending on the country, for a cup of coffee, the producer is sacrificing the value of his land”.

The FNC says the coffee market generates around $200 billion a year, but producers see only 10 per cent of that.

In order to break away from the stock exchange, Colombia needs to find allies amongst other soft coffee producers in Central America and Africa whose quality would allow them to negotiate their own prices, the FNC says.

Colombian coffee has been priced on the NYSE for decades, and such a radical change must first find approval amongst the country’s coffee growers.

If such a consensus is found, it would then need to be discussed at the OIC meeting at the end of March in Kenya and then a meeting of producers in Brazil in July.

MOST VIEWED

  • Man Covid-19 positive after Thailand trip

    The Ministry of Health on Saturday reported the third Covid-19 case in less than two weeks, bringing the total to 125. The man, a 26-year-old from Tbong Khmum province's Tbong Khmum district, arrived at the O'Beichoan border checkpoint in Banteay Meanchey province on Thursday. He is

  • Kingdom's GDP growth to narrow -1% to -2.9%, World Bank says

    The World Bank expects further recoil on Cambodia’s gross domestic product (GDP) growth to between minus one per cent and minus 2.9 per cent for 2020 as its main growth drivers – tourism, manufacturing exports and construction – take a beating due to Covid-19, its latest economic update

  • Vietnam: Tougher sentences for child abusers

    Several National Assembly (NA) deputies in Vietnam are calling for tougher penalties to be handed down to child abusers. They hope stricter punishments will act as a strong deterrent to prevent offenders committing further offences in the future. Extreme measures such as chemical castration were

  • Central bank to shun small US banknotes

    The National Bank of Cambodia (NBC) is considering not accepting smaller denominated US dollar banknotes – $1, $2 and $5 – from banks and microfinance institutions (MFIs) which it said are flooding its stockpile as the demand for those notes is low. While some banking insiders welcomed the move as

  • PM lauded in Covid-19 fight

    World Health Organisation (WHO) director-general Tedros Adhanom Ghebreyesus sent a letter to Prime Minister Hun Sen thanking him for following the WHO’s guidance and commending Cambodia’s efforts in the fight against Covid-19. In his letter made public by the Ministry of Foreign Affairs

  • Workers return, hope for salaries

    More than 600 factory workers in the capital’s Chaom Chao commune in Por Sen Chey district returned to work after the factory’s owner promised to pay their salaries in instalments until the middle of next month. On Tuesday and Wednesday, more than 600 workers gathered