""

Required Report - public distribution

**Date:** 11/17/2003

**GAIN Report Number:** CO3017

CO3017

**Colombia**

**Coffee**

**Semi-Annual**

**2003**

**Approved by:**

![](media/image1.wmf)David J. Mergen

U.S Embassy

**Prepared by:**

Leonardo Pinzon

**Report Highlights:**

Colombia's production reached 11.7 million 60-Kg bags in the
October-September 2002/03 crop year, well above initial estimates due to
excellent weather. Production is estimated at 11.8 million bags for the
2003/04 year. Exports are forecast to continue at 10.5 million 60-kg
bags. Consumption is still low and recovery looks weak. Colombia
continues to press for the U.S. to join the International Coffee
Organization.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Semi-Annual Report

Bogota \[CO1\]

\[CO\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Consumption 4](#consumption)

[Trade 4](#trade)

[Stocks 4](#stocks)

[Policy 4](#policy)

[Prices 5](#prices)

# Executive Summary

# 

Colombian coffee production is currently in a period of consolidation.
Due to low prices, marginal areas are coming out of production. At the
same time production is being modernized (through replacement of old
plants) and made more intensive in the best producing areas (between
1,500 and 1,800 meters).

Colombian coffee production is estimated at 11.7 million 60-kg bags for
the 2002/2003 marketing year, well above initial estimates due to
excellent weather conditions. The forecast for the following 2003/2004
marketing year is for slight growth to 11.8 million 60-kg bags, if
normal weather conditions prevail, largely due to modernization of
production in the main growing areas. Domestic consumption is not
expected to change noticeably during the next two years, although there
is a trend for growing consumption of soluble (instant) coffee.
Colombia's coffee exports are expected maintain their current level of
around 10.5 million bags. Colombian government and coffee authorities
continue to pressure for the U.S. to join the International Coffee
Organization (ICO).

# 

# Production

Colombia's production reached 11.7 million 60-Kg bags in the
October-September 2002/03 crop year. This production level is higher
than previous estimates made by post due to extremely good weather, with
dry periods to stress plants during the blossom period followed by good
rain while the trees were growing.

The production forecast for the 2003/04 crop is for 11.8 million 60-kg
bags. Production is expected to continue to be close to level of the
previous year due to good weather thus far in the season and the
renovation of old plantings. According to the coffee cooperatives, the
main sales point for coffee producers, the renovation program for old
plantings has now been completed on an area totaling 320,000 hectares.

Over the next three to five years, marginal production areas are
expected to continue to leave coffee production and the more traditional
coffee producing areas are expected intensify production. The total area
planted is expected to continue to fall. An estimated 30,000 hectares of
coffee came out of production during the two past years. These are
marginal areas for coffee production located mainly in the lower
altitudes of the coffee farms, which means low productivity and low
quality. The coffee renovation program is only conducted and supported
for the main coffee areas (located in the best altitude between 1,500
meters and 1,800 meters). Growers in these areas increased the density
planted, which is currently calculated at 5,700 trees per hectare, up
from 4,800 trees per hectare previously. Coffee plantations now have an
average age of 5.5 years, down from the 7.5 years before the renovation
program. Over the longer run, production under normal weather conditions
is expected to be between 11.0 and 12.0 million bags.

Despite budgetary difficulties, the Colombian government will continue
supporting the coffee renovation program until it reaches the target of
350,000 hectares (approximately half the current planted area). The
program will be completed during this crop year. The support level for
each tree renewed last year was 100 pesos (3.6 cents), which covers
around 25 percent of the actual calculated cost of 400 pesos (14.3
cents).

An estimated 700,000 60-kg bags of specialty coffees were produced in
Colombia last year. Local contacts estimate that this figure could reach
1.5 million bags in the next four years. Within this production, the
area devoted to produce organic coffees has been increasing, although no
estimates of organic production are available. There are over 50
registered brands of specialty coffees in Colombia. These are currently
estimated to have the potential export one million bags (an estimated 30
percent of the world demand for specialty coffees).

# Consumption

Local coffee consumption is considered low when compared with other
producing countries.

Total coffee consumption decreased last year 6 percent due to the
economic downturn. Soluble coffee consumption grew as a result of the
coffee brand "Buendia" entering into the local market. This brand is
manufactured by the National Growers Federation (FEDECAFE) and was
previously sold only to external markets. Overall domestic consumption
is expected to grow in the future because the improving overall quality
of coffee sold on the local market and the strong marketing efforts of
FEDECAFE in opening coffee stores in Colombia under the brand name "Juan
Valdez". The purpose of these stores is mainly to give consumers the
opportunity of tasting 100 percent Colombian coffee, as a part of
marketing higher quality Colombian coffee.

## 

# Trade

Most of Colombia's coffee is produced for the export market, with 90
percent of last year's crop was exported. In commercial year 2002/03
(October -- September), Colombia exported 10.48 million 60-kg bags, down
2 percent from 10.66 million 60-kg bags a year before. The U.S. market
received 35 percent of the total exports of Colombia, which represents
around 20 percent of the total U.S. consumption. Colombia exported to
the U.S. 3.6 million 60-kg bags, twice as much as the amount exported to
Germany its second largest market.

# Stocks

The few last years Colombia has generally maintained between one to two
million 60-kg bags as normal stock level. The stocks held at the end of
crop year 2002/03 were 1.2 million bags and this is estimated to fall
slightly to 1.1 million bags at the end of the 2003/04 year. Lower
international prices and weaker finances at the National Coffee
Federation have made it unattractive for growers to keep high
inventories.

# Policy

Colombia is pushing for the U.S. to join the International Coffee
Organization (ICO). Colombian coffee representatives and leaders
generally accept that the ICO will not be able to return to the previous
system of international quotas, but they do hope that having the U.S. in
the organization will help in marketing coffee, establishing minimum
standards to remove low quality coffee from the market and improve the
international rules covering coffee trade. Colombia is also working with
the Association of Coffee Producing Countries (ACPC) to remove the
supply of lower quality coffee. While some low quality coffee has been
removed from the market, this has not had a significant impact on
prices.

The coffee sector is considered to be strategic for Colombia due to the
large number of families that depend on coffee production (an estimated
500,000 families). The Colombian Government currently provides
supplemental payments when the price paid to growers falls below 300,000
pesos (\$10.50) per 125-kg bag. The current payment is 1,000 pesos (35
cents) per 125-kg bag.

Coffee exporters pay a compulsory check-off for each pound of coffee
exported of 5 cents (142.5 pesos). This payment is shared between
FEDECAFE (3 cents), which invests the funds in programs such as
scientific research through CENICAFE (the center for research on coffee)
and educational, social and infrastructure programs. The remaining 2
cents are given to the National Coffee Fund (FNC). The FNC is managed by
FEDECAFE with the goal of stabilizing prices paid to producers.

# Prices

During 2003 prices, paid to growers have improved somewhat due to better
international prices and devaluation of the Colombian peso early in the
year.

+-------------------+------+------+------+------+------+------+------+
| ##                |      |      |      |      |      |      |      |
| #### **Colombia** |      |      |      |      |      |      |      |
|                   |      |      |      |      |      |      |      |
| **Coffee, Green** |      |      |      |      |      |      |      |
|                   |      |      |      |      |      |      |      |
| **(1000           |      |      |      |      |      |      |      |
| HA)(MILLION       |      |      |      |      |      |      |      |
| TREES)(1000 60 kg |      |      |      |      |      |      |      |
| BAGS)**           |      |      |      |      |      |      |      |
+-------------------+------+------+------+------+------+------+------+
|                   |      |      |      |      |      |      |      |
+-------------------+------+------+------+------+------+------+------+
|                   |      |      |      |      |      |      |      |
+-------------------+------+------+------+------+------+------+------+
|                   | **20 | **R  | **20 | **Es | **20 | **Fo | **U  |
|                   | 02** | evis | 03** | tima | 04** | reca | OM** |
|                   |      | ed** |      | te** |      | st** |      |
+-------------------+------+------+------+------+------+------+------+
|                   | **   | **   | **   | **   | **   | **   |      |
|                   | USDA | Post | USDA | Post | USDA | Post |      |
|                   | Offi | Esti | Offi | Esti | Offi | Esti |      |
|                   | cial | mate | cial | mate | cial | mate |      |
|                   | \    | \    | \    | \    | \    | \    |      |
|                   | [Old | [New | [Old | [New | [Old | [New |      |
|                   | \]** | \]** | \]** | \]** | \]** | \]** |      |
+-------------------+------+------+------+------+------+------+------+
| ########          |      | 10/  |      | 10/  |      | 10/  | MM/  |
| Market Year Begin |      | 2001 |      | 2002 |      | 2003 | YYYY |
+-------------------+------+------+------+------+------+------+------+
| **Area Planted**  | 805  | 805  | 795  | 775  | 785  | 760  | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | HA)  |
+-------------------+------+------+------+------+------+------+------+
| **Area            | 650  | 650  | 650  | 630  | 650  | 620  | (    |
| Harvested**       |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | HA)  |
+-------------------+------+------+------+------+------+------+------+
| **Bearing Trees** | 2790 | 2790 | 2790 | 2850 | 2790 | 2800 | (MIL |
|                   |      |      |      |      |      |      | LION |
|                   |      |      |      |      |      |      | TR   |
|                   |      |      |      |      |      |      | EES) |
+-------------------+------+------+------+------+------+------+------+
| **Non-Bearing     | 1030 | 1030 | 1030 | 1030 | 1030 | 1030 | (MIL |
| Trees**           |      |      |      |      |      |      | LION |
|                   |      |      |      |      |      |      | TR   |
|                   |      |      |      |      |      |      | EES) |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL Tree      | 3820 | 3820 | 3820 | 3880 | 3820 | 3830 | (MIL |
| Population**      |      |      |      |      |      |      | LION |
|                   |      |      |      |      |      |      | TR   |
|                   |      |      |      |      |      |      | EES) |
+-------------------+------+------+------+------+------+------+------+
| **Beginning       | 1618 | 1618 | 1393 | 1393 | 923  | 1207 | (    |
| Stocks**          |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Arabica         | 1    | 1    | 1    | 1    | 1    | 1    | (    |
| Production**      | 1950 | 1950 | 0900 | 1712 | 1800 | 1800 | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Robusta         | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Production**      |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Other           | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Production**      |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL           | 1    | 1    | 1    | 1    | 1    | 1    | (    |
| Production**      | 1950 | 1950 | 0900 | 1712 | 1800 | 1800 | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Bean Imports**  | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Roast & Ground  | 80   | 80   | 95   | 70   | 95   | 80   | (    |
| Imports**         |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Soluble         | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Imports**         |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL Imports** | 80   | 80   | 95   | 70   | 95   | 80   | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL SUPPLY**  | 1    | 1    | 1    | 1    | 1    | 1    | (    |
|                   | 3648 | 3648 | 2388 | 3175 | 2818 | 3087 | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Bean Exports**  | 1    | 1    | 9200 | 9808 | 9800 | 9820 | (    |
|                   | 0005 | 0005 |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Roast & Ground  | 120  | 120  | 120  | 120  | 120  | 130  | (    |
| Exports**         |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Soluble         | 540  | 540  | 550  | 550  | 560  | 560  | (    |
| Exports**         |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL Exports** | 1    | 1    | 9870 | 1    | 1    | 1    | (    |
|                   | 0665 | 0665 |      | 0478 | 0480 | 0510 | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Rst,Ground Dom. | 1350 | 1350 | 1350 | 1240 | 1350 | 1250 | (    |
| Consum**          |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Soluble Dom.    | 240  | 240  | 245  | 250  | 255  | 255  | (    |
| Consum.**         |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL Dom.      | 1590 | 1590 | 1595 | 1490 | 1605 | 1505 | (    |
| Consumption**     |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **Ending Stocks** | 1393 | 1393 | 923  | 1207 | 733  | 1072 | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL           | 1    | 1    | 1    | 1    | 1    | 1    | (    |
| DISTRIBUTION**    | 3648 | 3648 | 2388 | 3175 | 2818 | 3087 | 1000 |
|                   |      |      |      |      |      |      | 60   |
|                   |      |      |      |      |      |      | KG   |
|                   |      |      |      |      |      |      | B    |
|                   |      |      |      |      |      |      | AGS) |
+-------------------+------+------+------+------+------+------+------+

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