The local coffee harvest rebounds. After almost 30 months of the La Niña phenomenon (which ended in December 2022), and now that we are in a neutral phase after El Niño in 2023, we finally observe a rebound in the coffee harvest, with an annual variation of 14,4% accumulated between January and May of this year. The most positive thing is that growth has been accelerating: while in March the harvest was 8% higher than in March 2023, in April the increase was 31% and in May 39%.

Coffee GDP still does not reflect recovery of the harvest. While the first quarter harvest grew 3.5% compared to 1Q23, the real variation in GDP in the sector was -3.6%. The harvest is surely the largest component in measuring GDP, but it is possibly not everything. The explanation may be a negative variation in planted area in 2023 vs. 2022 (-0.1%), and some coffee plantation renovations that, according to the FNC, look somewhat low (49 thousand hectares renovated between January and September 2023, with an aging technical area that increased 44 thousand hectares between 2019 and 2023).

Conjunctural growth is one thing and structural growth is another. If you look at the coffee-strewn areas in Colombia, the year 2013 seems to have been a turning point. At that time there were 974 thousand hectares, five years later we dropped to 877 thousand, and after another five years (2023) 841 thousand were reported. But not all departments decrease, which shows a change in the relevance of the regions. Huila and Cauca have been standing out for the quality of the cup, which has skyrocketed the specialty coffee business, and rust-resistant varieties have greatly penetrated Santander, with significant improvements in productivity.

The global Arabica coffee market, where Colombia competes, is the most affected since last year. Compared to robusta coffee, this variety usually has a higher price: its demand is affected in times of low economic growth and high inflation. In addition, global supply has grown with the recovery of Brazil, which, according to the USDA, would close the 2023/24 coffee year with an increase of 5.1 mn of bags of Arabica coffee (+13%), and in 2024/25 another 3.3 mn of bags would grow.

2024: the price of Colombian coffee begins to recover. 2021 and 2022 were years of high international prices, but the harvest fell due to excess rain. 2023 arrived and both variables disappointed: international prices plummeted and production rebounded only 2.4%, reaching 11.3 mn bags (calendar year). In 2024, history has been changing: accumulated production between January and May grew 14.4%, and international prices of Colombian coffee in June revolved around USD2.5/lb. Although in the average for the semester these prices are slightly lower than those of 1Q23, the trend is very marked upwards (22% increase between January and June 2024).

If it weren't for the premium, the accounts would be happier. The internal price of the coffee load is made up of three variables: exchange rate, price of the New York Stock Exchange and the premium that importers pay for coffee from Colombia. The latter fell in 2023, to the extent that the roasting industry in export markets probably decided to replace Colombian coffee with other origins to reduce costs. That free fall seems to have come to an end, and a upward trend is observed again.

In the internal price figures for coffee, May was on average around COP1.6 mn the load, but since mid-June it has already exceeded COP1.8 mn, which also reflects the recent increase in the TRM.

Fuente: Dirección de Investigaciones Económicas, Sectoriales y de Mercado - Grupo Bancolombia.