IKN

Hereditary sloth instructs me

You sure that Colombian coffee is from Colombia, Señor Valdez?

There’s something fishy going on in the Colombia coffee world and it might be time for Juan Valdez to swap that donkey for an alpaca.

In a good report yesterday, Bloomie’s Heather Walsh caught up with Jorge Lozano of the National Association of Colombian Coffee Exporters who predicted that, due mainly to inclement weather factors, Colombia would produce less than 11 million bags of coffee this year for the first time since 2001. For the record a “bag” weighs 60kg, so as 2008 production was 11.5m bags we’re looking at a difference of 30,000 metric tonnes (hey, lotta coffee there people..world’s third largest producer after Brazil and Vietnam). Lozano is quoted as saying;

“The figures we’re seeing show a substantial reduction. Eleven million would be a miracle….Colombia has been selling all of its production.”

Indeed it has been selling it all. Keen to do it too, as coffee is one of the main export products of the country and is driven by the famous Juan Valdez “100% Pure Colombian Coffee” campaign as the dude and his donkey wander over the TV screens of the USA. But is it that pure? This year there’s good reason to suspect that those 100% Colombian beans are currently being cut with coffee imported into Colombia from other countries.

Exhibit one: This report in Peru’s El Comercio that has local coffee growers complaining about unfair competition. Apparently Peruvian coffee growers have been selling a lot of their wares to Colombians for better prices than they would have obtained by selling on the open market or via established deals and the Peru coffee people are worried about making the contracted quotas due to this selling to Colombia. El Comercio reports the words of César Rivas Peña, head of the National Coffee Group, in the following way:

Mysteriously, so far this year 132,000 quintales of coffee have been sent to Colombia when normally only 80,000 are sent.

As a Peruvian “quintal” is a measurement of 46kg, this means that so far this year 6,072MT of Peruvian coffee beans have made their way into Colombia, or in other words 1/5th of Colombia’s theoretical YoY shortfall.

Exhibit Two: Your humble servant wondered whether Colombia’s stats office, DANE, was also registering higher coffee imports this year. So off I trotted to the DANE site and got to the right page (if you really care and are as wonky as me you need to click “annexos estadísticos 2009 (Marzo)” to get the right XLS file to pop up and then it’s the line item 24 on the Excel page A11) and sure enough, the diligent people at DANE had registered an increase in coffee imports in the first three months of 2009.

An enormous, eye-popping 405% increase, in fact (yes, that says four hundred and five percent). Imports of “coffees, teas and infusions” (read ‘coffee’) have risen from 1,412MT in the first quarter of 2008 to 7,134MT in the first quarter of 2009, a difference of 5,722MT. It also means that if Colombia keeps importing at the same rate throughout 2009 it will end up buying around 28,500MT of foreign coffee…which is weirdly and strangely close to the 30,000MT production shortfall predicted by Jorge Lozano in his interview with Heather Walsh. On another level, by cutting that down into monthly averages it means we can estimate 2/3rds of the coffee imports have so far come from Peru. It remains to be seen whether Peru will keep supplying Colombia at such and accelerated rhythm, however, if its own export association is starting to cry foul.

Exhibit three: And here’s the strangest thing. While Jorge Lozano, a 79 year old past master expert of his field, was telling Bloomie that 11m bags in 2009 would be “a miracle”, the Colombian minister in charge of the coffee sector was making soothing and smoothing noises to the world in London today. Colombian Agriculture Minister Andres Fernandez Acosta was quoted by Reuters as saying:

“We have no defaults at the moment and we won’t have defaults. Because of weather conditions there have been delays. By June everything will be in place and we will have no problems meeting our commitments.”

He then went on to say that Colombia’s 2009 production would be 11.5m bags, a full half a million bags (and again, that coincidental 30,000MT) greater than Lozano’s “miracle limit” of 11M bags.

Conclusion: It looks to me as if Colombia isn’t going to live up to its advertised “100% Colombian” claims this year. That a political talking head can predict a substantially higher harvest of coffee than someone who knows the industry backwards and has worked in it all their life is one reason to be very suspicious. That Peruvian coffee producers are complaining of unfair competition from Colombian buyers who are snapping up their coffee (and not any old bean either, as Peru complains that Colombia only wants its top “export quality” product). And the sudden 400% increase in coffee imports registered by the Colombian stats office gives the issue a numerical backbone, too. With all the numbers (the shortfall, the imports, the ministerial overestimation) all hovering around the 30,000MT mark the coincidences become too much to ignore.

So next time you enjoy a cup of Valdez’s “100% pure Colombian” finest, don’t fret too much if you start having visions of the Nazca lines or Machu Picchu.

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