Bloomberg News

Colombia Triples Peru Coffee Buying on Harvest Decline

April 09, 2012

Colombia, the second-largest producer of Arabica coffee beans, almost tripled purchases of Peruvian coffee to make up for a decline in harvests this year, according to the head of Peru’s main coffee-growing group.

Colombia bought 99,581 60-kilogram bags (132 pounds) through February, almost triple the 36,545 bags a year earlier, making it the second-largest buyer of Peruvian coffee after the U.S., said Eduardo Montauban, head of the nation’s Coffee Chamber. Colombia accounted for 22 percent of Peru’s coffee sales in the first two months, up from 8 percent last year, he said.

Colombia may see harvests fall to 7.5 million bags this year from 7.81 million bags in 2011, a 25-year-low, because of heavy rainfall that damaged flowering and increased crop diseases, according to Colombia’s National Federation of Coffee Growers. Peru, which produced a record 5.2 million bags last year, is the world’s fifth-largest coffee producer.

“Colombia’s a good market and pays a good price,” Montauban said today in an interview in Lima. “They’ve had a production deficit for several years, so that’s a window of opportunity for Peru.”

Doubling Plantations

Peru seeks to double plantations to 780,000 hectares (1.93 million acres) over the next decade as credit for fertilizers, land titling and training for farmers improves yields and makes coffee planters more competitive, Montauban said. Coffee farmers invest, on average, $2,500 per hectare, according to the chamber.

Investments in ports and roads such as the $1 billion Inter-Oceanic Highway linking ports in Peru and Brazil will cut transport costs for farmers, while free-trade agreements with countries like China and Japan will open up markets, he said.

“We have the land, we have the markets, so the sky’s the limit,” Montauban said. “The highland jungle area above 1,000 meters that is ideal for coffee runs down the length of Peru.”

Peruvian coffee export revenue jumped 27 percent to a record $1.6 billion last year as prices surged and companies including Kraft Foods Inc. (KFT:US), Nestle SA (NESN) and Starbucks Corp. (SBUX:US) boosted purchases, Montauban said.

Export revenue will drop to $1.1 billion this year as harvests are expected to fall about 8 percent in the second year of their biannual cycle and prices decline from a 14-year high in May 2011, he said.

Arabica-coffee futures for May delivery retreated 2.7 percent to $1.7805 a pound on ICE, the fourth consecutive drop. Prices have dropped 23 percent this year.

To contact the reporter on this story: Alexander Emery in Lima at aemery1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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