Colombian coffee traders default
on their contracts causing panic on the market
October 14 - 2021 Coffee Geography Magazine
The
world's No. 2 Arabica producer, Colombia have defaulted on 1 million bags of coffee
beans this year by exporters and traders who broke their commitments to deliver
their produces causing roasters in consuming countries to face even higher prices.
About
550,000 Colombian coffee farmers make their living
growing coffee which are based on the benchmark futures contracts on the ICE
exchange. The farmers decided to cling with their product to re-sell the coffee
at higher rates. World coffee prices have already soared 53% this year due to
Brazil’s weather condition. The trade default in Colombia is pushing the prices
to even the next level impacting the roasting business sector to lose profit.
Leading
global roasters may change the blending style and avoiding 'single origin
Colombia' coffees due to the sourcing problem. Large traders are expecting losses of $8-10 million each on the defaulted coffee, while the coffee growers federation FNC, which represents farmers accounts for 20% of the
country's 12.5 million bags of annual coffee exports, faces higher losses.
For
the last six years, selling coffee forward in Colombia was popular up until
this year, a kind of move mostly in favor of farmers as world prices drifted
lower so farmers received better prices for their coffee on delivery. Defaults
in a major producer like Colombia always aggravate price spikes on the world
markets. It is now witnessed all across the board.