Required Report - public distribution

**Date:** 11/15/2005

**GAIN Report Number:** VE5019

VE5019

**Venezuela**

**Coffee**

**Coffee Update**

**2005**

**Approved by:**

![](media/image1.wmf)Bonnie Borris

U.S. Embassy VENEZUELA

**Prepared by:**

Clara Nuñez

**Report Highlights:**

Coffee production is estimated to fall slightly to 820,000 bags due to
weather conditions. Exports for the period 2005/06 are forecast to be in
the order of 115,000 bags since most coffee production is consumed
locally. The Venezuelan coffee sector welcomes the entry of the US as a
member of ICO; however, it is unknown as to whether the GOV holds this
same position. The GOV recently announced the reactivation of a coffee
processing company aimed at supplying the state-owned food distribution
chain, MERCAL.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Semi-Annual Report

Caracas \[VE1\]

\[VE\]

In addition to supplying the domestic market with coffee beans, coffee
production in Venezuela plays a social role. It is a traditional crop,
which generates artisan work in small holdings located in mountainous
communities. In consequence it is responsible for a great deal of rural
employment, helping restrain the exodus of people from rural to urban
areas.

Coffee price fluctuations, along with increasing production costs and
bad weather, have caused a decline in coffee production in Venezuela
during the last five years. Since most coffee farms are located in
states near the Colombian border, insecurity in the countryside also
plays a negative role. As a consequence of so many adverse factors,
national coffee production has been decreasing with no end in sight for
this tendency.

In the last five years, Venezuela has produced between 800,000 and one
million bags per year but has exported very little because of high
internal consumption. In addition, in 2003/04 there was a government ban
against exporting coffee in order to conserve internal supply.
Venezuelan farmers, particularly those from the region bordering
Colombia, produce some fine coffees for export with complex body and
relatively low acidity.

Forecasted numbers for 2005/06 do not differ much from last report
(VE5011). However, coffee production is estimated to fall slightly from
825,000 bags to 820,000 bags due to weather conditions. As reported in
early May of this year, torrential rains registered in the western part
of the country caused severe agricultural damage. Floods disrupted
harvesting operations of the coffee crop in the state of Mérida,
affecting about 10 percent of the coffee area planted in that region.
Many roads were damaged disrupting the transportation of the product.

Local coffee consumption is considered high when compared with other
producing countries. Total domestic consumption for 2005/06 is expected
to remain at the same level of 720,000 bags as estimated in the previous
report.

Traditionally the US has been the main market for Venezuelan coffee
exports. Small coffee exporters are focusing on the high-quality market
segments in the US due to the high price premium for these coffees.
Exports for the period 2005/06 are forecast to be in the order of
115,000 bags since most of the coffee production is consumed locally.

As the main coffee consuming country in the world, the Venezuelan coffee
sector welcomes the entry of the US as a member of the International
Coffee Organization (ICO). However, it is unknown as to whether the
Government of Venezuela holds this same position.

The most important news of these months is the decision of the
Venezuelan Government to create a state-owned coffee processing company,
"Café Venezuela." It was announced that starting at the end of November
the government, together with two local cooperatives, would reactivate
roasting plants located in the western region of the country. According
to the Minister of Food this decision, coupled with the possible
importation of green coffee from Brazil, "will allow us to end monopoly
and speculation." With almost unlimited government financing due to huge
oil resources, this company is expected to supply the demand of the
state-owned food distribution chain, MERCAL, which controls more than 30
percent of the food-retailing sector in the country.

As was to be expected, these proposals have created alarm among
producers who have been arguing that that there is enough production to
cover domestic demand, a claim that looks justified since there is room
for exporting about 10 percent of the crop. Producers claim that the
GOV's plans to import the coffee are a result of its reluctance to
adjust both farm gate and retail coffee prices.

+------------+------+------+------+------+------+------+------+------+
| ###### **V |      |      |      |      |      |      |      |      |
| enezuela** |      |      |      |      |      |      |      |      |
|            |      |      |      |      |      |      |      |      |
| **Coffee,  |      |      |      |      |      |      |      |      |
| Green**    |      |      |      |      |      |      |      |      |
|            |      |      |      |      |      |      |      |      |
| **(1000    |      |      |      |      |      |      |      |      |
| H          |      |      |      |      |      |      |      |      |
| A)(MILLION |      |      |      |      |      |      |      |      |
| T          |      |      |      |      |      |      |      |      |
| REES)(1000 |      |      |      |      |      |      |      |      |
| 60 KG      |      |      |      |      |      |      |      |      |
| BAGS)**    |      |      |      |      |      |      |      |      |
+------------+------+------+------+------+------+------+------+------+
|            | **20 | **R  | **20 | **Es | **20 | **Fo | **U  |      |
|            | 04** | evis | 05** | tima | 06** | reca | OM** |      |
|            |      | ed** |      | te** |      | st** |      |      |
+------------+------+------+------+------+------+------+------+------+
|            | **   | **   | **   | **   | **   | **   |      |      |
|            | USDA | Post | USDA | Post | USDA | Post |      |      |
|            | Offi | E    | Offi | E    | Offi | E    |      |      |
|            | cial | stim | cial | stim | cial | stim |      |      |
|            | \    | ate\ | \    | ate\ | \    | ate\ |      |      |
|            | [Old | [New | [Old | [New | [Old | [New |      |      |
|            | \]** | \]** | \]** | \]** | \]** | \]** |      |      |
+------------+------+------+------+------+------+------+------+------+
| **Market   |      | **1  |      | **1  |      | **1  | **M  |      |
| Year       |      | 0/20 |      | 0/20 |      | 0/20 | M/YY |      |
| Begin**    |      | 03** |      | 04** |      | 05** | YY** |      |
+------------+------+------+------+------+------+------+------+------+
| ####### Ar | 310  | 310  | 300  | 300  | 300  | 300  | (    |      |
| ea Planted |      |      |      |      |      |      | 1000 |      |
|            |      |      |      |      |      |      | HA)  |      |
+------------+------+------+------+------+------+------+------+------+
| **Area     | 210  | 210  | 200  | 200  | 200  | 200  | (    |      |
| H          |      |      |      |      |      |      | 1000 |      |
| arvested** |      |      |      |      |      |      | HA)  |      |
+------------+------+------+------+------+------+------+------+------+
| **Bearing  | 580  | 580  | 560  | 560  | 560  | 560  | (MIL |      |
| Trees**    |      |      |      |      |      |      | LION |      |
|            |      |      |      |      |      |      | TR   |      |
|            |      |      |      |      |      |      | EES) |      |
+------------+------+------+------+------+------+------+------+------+
| **N        | 25   | 25   | 30   | 30   | 30   | 30   | (MIL |      |
| on-Bearing |      |      |      |      |      |      | LION |      |
| Trees**    |      |      |      |      |      |      | TR   |      |
|            |      |      |      |      |      |      | EES) |      |
+------------+------+------+------+------+------+------+------+------+
| **TOTAL    | 605  | 605  | 590  | 590  | 590  | 590  | (MIL |      |
| Tree       |      |      |      |      |      |      | LION |      |
| Po         |      |      |      |      |      |      | TR   |      |
| pulation** |      |      |      |      |      |      | EES) |      |
+------------+------+------+------+------+------+------+------+------+
| *          | 528  | 528  | 475  | 475  | 553  | 553  | (    |      |
| *Beginning |      |      |      |      |      |      | 1000 |      |
| Stocks**   |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Arabica  | 825  | 825  | 820  | 820  | 825  | 820  | (    |      |
| Pr         |      |      |      |      |      |      | 1000 |      |
| oduction** |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Robusta  | 0    | 0    | 0    | 0    | 0    | 0    | (    |      |
| Pr         |      |      |      |      |      |      | 1000 |      |
| oduction** |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Other    | 0    | 0    | 0    | 0    | 0    | 0    | (    |      |
| Pr         |      |      |      |      |      |      | 1000 |      |
| oduction** |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **TOTAL    | 825  | 825  | 820  | 820  | 825  | 820  | (    |      |
| Pr         |      |      |      |      |      |      | 1000 |      |
| oduction** |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Bean     | 5    | 5    | 0    | 0    | 10   | 10   | (    |      |
| Imports**  |      |      |      |      |      |      | 1000 |      |
|            |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Roast &  | 2    | 2    | 3    | 3    | 3    | 3    | (    |      |
| Ground     |      |      |      |      |      |      | 1000 |      |
| Imports**  |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Soluble  | 0    | 0    | 0    | 0    | 0    | 0    | (    |      |
| Imports**  |      |      |      |      |      |      | 1000 |      |
|            |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| #          | 7    | 7    | 3    | 3    | 13   | 13   | (    |      |
| ###### TOT |      |      |      |      |      |      | 1000 |      |
| AL Imports |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **TOTAL    | 1360 | 1360 | 1298 | 1298 | 1391 | 1386 | (    |      |
| SUPPLY**   |      |      |      |      |      |      | 1000 |      |
|            |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Bean     | 150  | 150  | 0    | 0    | 120  | 110  | (    |      |
| Exports**  |      |      |      |      |      |      | 1000 |      |
|            |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Roast &  | 35   | 35   | 35   | 35   | 35   | 35   | (    |      |
| Ground     |      |      |      |      |      |      | 1000 |      |
| Exports**  |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Soluble  | 0    | 0    | 0    | 0    | 0    | 0    | (    |      |
| Exports**  |      |      |      |      |      |      | 1000 |      |
|            |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **TOTAL    | 185  | 185  | 35   | 35   | 155  | 145  | (    |      |
| Exports**  |      |      |      |      |      |      | 1000 |      |
|            |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **         | 690  | 690  | 700  | 700  | 710  | 710  | (    |      |
| Rst,Ground |      |      |      |      |      |      | 1000 |      |
| Dom.       |      |      |      |      |      |      | 60   |      |
| Consum**   |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **Soluble  | 10   | 10   | 10   | 10   | 10   | 10   | (    |      |
| Dom.       |      |      |      |      |      |      | 1000 |      |
| Consum.**  |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **TOTAL    | 700  | 700  | 710  | 710  | 720  | 720  | (    |      |
| Dom.       |      |      |      |      |      |      | 1000 |      |
| Con        |      |      |      |      |      |      | 60   |      |
| sumption** |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| #          | 475  | 475  | 553  | 553  | 516  | 521  | (    |      |
| ###### End |      |      |      |      |      |      | 1000 |      |
| ing Stocks |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+
| **TOTAL    | 1360 | 1360 | 1298 | 1298 | 1391 | 1386 | (    |      |
| DIST       |      |      |      |      |      |      | 1000 |      |
| RIBUTION** |      |      |      |      |      |      | 60   |      |
|            |      |      |      |      |      |      | KG   |      |
|            |      |      |      |      |      |      | B    |      |
|            |      |      |      |      |      |      | AGS) |      |
+------------+------+------+------+------+------+------+------+------+