Bogota, November, 28/2011
Although 2011 has certainly been a year full of challenges, it has also been a year of success and important achievements for the Colombian coffee industry. The main obstacle that currently threatens the sector is the high level of precipitations, which began in 2009, worsened in 2010, and reached a critical point in 2011 with the re appearance of La Niña phenomenon.
Even though the persistence of this phenomenon has severely affected the industry’s development, the FNC´s ambitious renovation programs with rust resistant varieties, which up to October 2011 has exceeded 102,000 hectares, has managed to establish new and more dense plantations in more than 20% of the Colombian coffee growing area. By 2010, as a result of an investment of nearly US$ 30 million in vulnerable coffee plantations, the spread of coffee rust decreased from 44% to 12%. Without doubt the renovation initiative will change the structure of the Colombian coffee industry during the next 4 years.
During the past 12 months coffee production reached more than 8,2 million bags, a similar volume as in the previous year; the total crop value in the past 12 months reached over US$ 2.6 billion, a 32% increase compared with the similar period of the previous year.
Below you will find the main results achieved by the FNC in its different areas of action throughout the current year aiming to improve the well being of Colombian coffee growers.
Competitiveness and Innovation
“Achieving young, productive and profitable coffee farms”
By the end of 2011 nearly 120 thousand hectares will be renovated, most with rust resistant varieties
Earlier this year the FNC established ambitious goals dealing with the coffee farmer’s productivity and the renovation of their coffee plantations. The FNC offered support to initiatives such as the Permanence, Sustainability and Future (PSF) and the Competitiveness programs, to satisfy the particular needs of different types of growers.
During the first 10 months of 2011 the efficiency in the implementation of these programs made the renovation of 102 thousand hectares of coffee possible. This results, which represent an increase of 46% compared to the renovation figures registered by October 2010, confirm the commitment of coffee growers with the recovery of coffee production.
In order to renovate with resistant varieties at least 90% of the Colombian coffee area and therefore recover, stabilize, and increase coffee production, the FNC aims to renovate by the end of 2011 nearly 120 thousand hectares, and to continue at the same pace during the next 4 years.
As a result of the renovation programs led by the FNC, the coffee industry´s structure has changed significantly. While in 2006 54% of the cultivated area was planted with denser and more productive coffee plantations, 30% was resistant varieties, in 2011 the same indicators climbed respectively to 70% and 42 %.
46.127 PSF credits for the renovation of traditional and aged coffee plantations
With the support of the FNC´s Extension Service (ES) and the local financial community, the Permanence Sustainability and Future (PSF) program held 109 credit brigades around the country between January and November. The credits processed during these brigades, in addition to those handled by the ES, summed up a total of 46,127 credits, 51 % more than the same period last year. The credits executed in 2011, which benefited 41,930 coffee growers, amount to over US$130 million, 82% more than the previous year.
US$ 32 million for the “Plan de Emergencia Ola Invernal” program - Emergency Rust control
Besides generating serious human and infrastructure losses, the 2010-2011 La Niña phenomenon, deeply affected the country´s coffee production. The phenomenon caused an increase in the coffee region´s precipitations of 37% over the historical average, and in some regions the increase of precipitations even exceeded 50% and 85%. Additionally, sun brightness decreased 15% and temperature dropped 0,8 °C from historical averages, having a negative impact in the development of the coffee beans and trees.
Given this scenario, with the immediate support of the National Government and “Colombia Humanitaria,” the emergency program “Plan de Emergencia Ola Invernal” was launched. Worth US$ 32 million, the program´s objective was to recover plantations affected with coffee leaf rust, increase their production and productivity, and therefore the income of coffee growers. In the process of doing so, more than 173 thousand coffee hectares of rust susceptible varieties within 2 and 7 years of age were targeted with help with fertilizers and fungicides.
Results have been particularly encouraging; the program has managed to benefit around 200.000 producers, making this campaign one of the most successful projects financed by Colombia Humanitaria. With “Plan de Emergencia Ola Invernal” the FNC, the Colombian government, and Colombia Humanitaria have joined forces to notably decrease the spread of coffee leaf rust from 44% in May 2010, to 12% in July 2011.
Over 1.800 members of the Extension Service work permanently for the benefit of Colombian growers
Extension Service (ES) staff members (the army of peace in the yellow shirts) continued assisting coffee growers around the country by providing support and assessment in subjects regarding crops, farms, coffee areas, and institutions.
With resources provided by the National Coffee Fund, the Ministry of Agriculture and Rural Development, FINAGRO, and international allies, they were able to deliver technical assistance to the beneficiaries of the PSF program.
Education tasks: In 2011 the support provided by the ES was framed within the FNC´s objective of diminishing the effects of coffee rust in susceptible plantations and fomenting coffee crop renovation. In order to achieve a greater impact in the fulfillment of the organization´s objectives, different rural extension methodologies were adopted. As a result, in September 2011 nearly 692 thousand individual contacts took place, of which 30% consisted in farm visits. Another 415,000 contacts were developed in 28,000 group events including meetings, trips, field days, demonstrations, and community trainings.
Early Alert System to diminish the spread of coffee rust and coffee berry borer
To defend the 2011/2012 harvest, the Early Alert System was established in all of Colombia´s coffee regions. Besides allowing the FNC´s ES to understand the behavior of coffee rust and coffee beery borer, the system recommends the most suitable management practices depending on each moment and region.
This phytosanitary surveillance methodology, designed by the FNC’s Technical Management and Cenicafé, enables periodical monitoring and information analysis regarding more than 4 thousand coffee lots. Among other features, the system provides historical climate information, and considers crop phenology, distribution of the harvest and life cycle, as well as the behavior of the coffee rust and coffee berry borer.
109 thousand Colombian coffee growers are part of the specialty coffees programs
The origin, preparation, and environmental sustainability characteristics for which specialty coffees are recognized make consumers willing to pay higher prices for them. In 2011 the FNC’s specialty coffee program managed to cover 109 thousand coffee growers, of which 43 thousand have achieved the certification of 130 thousand hectares, and 63 thousand are still in the process of verification for 166 thousand hectares. In addition, in 2011 a Training Program that helps coffee growers comply the basic sustainable requirements by guiding them in social, environmental, economic, and commercial matters was launched.
Over US$ 0.6 million destined to the FNC´s “Familias Guardabosques” program
The “Familias Guarda Bosques” (Forest guard families) program, financed by Acción Social and the FNC, aims to improve environmental conditions and strengthen the production of high quality coffee of 2,880 coffee growers from the departments of Nariño, Huila, Cauca, Tolima, Magdalena, Guajira, Norte de Santander, Boyacá and Santander.
The “Familias Guardabosques” program aims to invest aprox. US$ 1.80 million in a period of 10 years; however, in three years after it was launched over US$ 618.000 have been executed. Correspondingly, 864 families have been qualified in hygiene and manufacturing practices, ecologic wet mill processes, residual waters, solar dried coffee, community organization, and coexistence workshops.
The Coffee Market
Positive trend in the registered crop value
Despite the expected production decrease, by the end of 2011 Colombia’s crop value will increase significantly reaching nearly US$ 2.6 billion. These resources will nurture the Colombian rural economy and increase the income of more than 550 thousand coffee growing families.
Colombian coffee exports increased 10%
In the past 12 months coffee exports increased 10% reaching 8.0 million bags, or 741 thousand more than the volume sold in the same period last year. Additionally, the exports value increased 47% reaching US$ 2.86 billion.
These positive results are a direct consequence of the better prices registered during the year, the positioning of Colombian coffee in international markets, and the commercialization of specialty coffees under the FNC´s value added strategy.
Value added and sustainable marketing
Average price paid by the FNC exceeded 515 US$/load
In 2011 the international Colombian coffee price transfer rate into domestic prices, a measure used to make sure no intermediaries abuse of Colombian coffee producers, continued to be high. Between January and October producers received 95% of the base price of Colombian coffee in the international market. Year to date prices paid by the National Coffee Fund increased 3.1% reaching over US$ 515 per load (125 kilograms of dry parchment coffee), compared to the base purchase price registered in the same period last year. In 2011 Colombian coffee growers who sold their coffee to the FNC managed National Coffee Fund were paid 22% more than in the period between January and October of 2010.
71% of the FNC´s exports were value added coffees
In order to help coffee producers obtain a greater proportion of their coffee´s final price, the FNC´s value added strategy intends to strengthen the relationship between producers and final consumers. Besides being involved with different segments of the specialty coffees, the FNC works permanently in the development of new coffee related opportunities, and offers customers complementary services.
Currently, 34% of Colombia´s coffee exports are value added coffees, reflecting a significant achievement considering that in the year 2000 value added coffee exports did not exceed 9%. In 2011 the FNC´s value added exports increased 71%.
In 2011 the FNC will export over 1 million specialty coffee bags
In the period between January and October 2011 the National Coffee Fund´s specialty coffee exports increased 2% reaching 760 million bags compared to the 750 million sold in the same period last year. The FNC has promoted specialty coffees in the international market, and managed to transfer value added to growers who are part of the initiative. By the end of 2011 the National Coffee Fund expects to export over 1 million specialty coffee bags.
Coffee grower from Huila received record price of 45 US$/lb
Within the FNC´s value added strategy, the promotion of high quality coffee through international competitions that strengthen Café de Colombia´s quality image and foment quality responsibility among coffee growers, is a priority.
As prove of the commercialization strategy´s scope, the champion of the sixth edition of the Cup of Excellence Colombia 2011 international competition sold his coffee in an electronic auction at the record price of 45 US$/lb. By this means, the coffee grower from Huila sold his coffee at the highest price a Colombian green coffee has ever been sold.
Buencafé Freeze Dried Colombian Coffee´s sales will reach nearly 8.500 tons
Thanks its efforts regarding product and service differentiation, Buencafé Freeze Dried Colombian Coffee´s sales will increase to approx. 8.500 tons. Sales will be headed to Eastern European (28%), Western European (24%), North American (21%), Asia-Pacific (12%), Colombian (7%), and South American (4%) markets.
Based on its international market strategy, Buencafé was present in key international fairs in China, USA, UK, Peru, Germany, Russia, and Holland. As a result, the company´s operational income in the Asian and South American markets, which are not traditional Colombian coffee consumers, has increased considerably.
Juan Valdez® Cafés expand based on an international franchise scheme
As part of its commercialization strategy Procafecol SA, the company that manages the Juan Valdez® brand, signed in September 2011 an agreement that granted the first Juan Valdez® international franchise to Aruba and Panama.
As prove of the brand´s popularity, the number of visitors to Juan Valdez® Cafés is estimated to reach by the end of 2011 nearly 34 million. This will mean that since the brand began operations, more than 160 million people have visited the 134 Juan Valdez® Cafés in Colombia and those that operate in other countries. Among other features, it’s worth noting that currently Juan Valdez® products are available in 5.500 establishments around the world.
011 was a positive year for Procafecol SA. Thanks to the reduction on the company´s operating expenses and the 20% increase in its operating income, Procafecol reached a 58% gross margin, meaning a 3% increase compared to 2010, measured in Colombian pesos.
The Juan Valdez® brand has generated over US$ 12.5 million in royalties
Thanks to various initiatives enabled by Procafecol SA, since 2002 the Juan Valdez® brand has generated over US$ 12.5 million in royalties for the National Coffee Fund. These resources are invested in social and economic impact projects for the benefit of the 553 thousand coffee growing families of the country.
The FNC´s market expansion strategy had positive results in 2011
The FNC´s initiatives towards penetrating and consolidating new markets, and taking advantage of the possibilities offered by emerging coffee consumers, had positive effects in the Colombian coffee industry.
Thanks to the relationships consolidated by Buencafé with European countries such as Russia, Ukraine, Belarus, Poland and the Baltic countries, Colombia´s freeze dried coffee has become one of the international consumer´s favorites. Likewise, Colombian coffee has conquered Asian markets thanks to the establishment of solid relationships with recognized companies in Korea and Japan. As an example of Colombian coffee´s success in Asia, the Emerald Mountain® beverage produced by Coca-Cola in Japan has exceeded sales expectations.
Among other features, the FNC´s 100% Colombian Coffee program has developed initiatives to maximize the distribution of Colombian coffee in traditional and emerging markets, and within the country´s boundaries.
In the past decade Colombian coffee exports to emerging markets have increased notably. While in the past ten years they grew at an annual rate of 8%, by October 2011 they registered a 10% increase compared to the same period in 2010. Through its encouraging programs the FNC will continue working permanently to maintain this positive trend.
Coffee agenda for Colombia and the world
US$ 1.2 million invested daily by the FNC in programs regarding sustainability
Since fomenting social corporative responsibility and social, environmental, and economic sustainability in the coffee community are the FNC’s main priorities, it daily invests over one million dollars in programs regarding those matters. When comparing the amount of resources distributed by the FNC with those executed by other rural NGO’s, there’s no doubt that the Federation is one of the main actors of the rural world.
During the first ten months of 2011, the FNC developed programs concerning Sustainability that Matters worth aprox. US$ 372 million. This value translates to investments that rise to the equivalent of US$ 1.2 million per day in programs regarding productivity and coffee quality strengthening, quality of life improvement, environmental protection, and access to information technologies.
International entities and the FNC join forces in social investment programs
In 2011 multiple agreements for the execution of social investment programs worth €10 million were signed between the FNC and international entities. Among the most important:
o “Huellas de Paz,” (Peace Paths) an agreement signed with the Spanish Agency for International Development Cooperation (AECID), and the Humanism and Democracy Foundation (H+D). The project, whose funding is estimated to exceed the €5,9 million, aims to increase social capital and competitiveness in the rural areas of Cauca, Nariño, Valle and Antioquia.
o “Plan Nescafé Colombia”, financed by the FNC and Nestlé with over €2,2 million, is destined to foment the implementation of Good Agricultural Practices in the department of Valle del Cauca.