Traders and roasters face losses as Colombian coffee farmers default on deliveries

Colombian coffee farmers have reportedly failed to deliver one million bags of beans | Photo credit: Julian Andres via Unsplash

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Coffee exporters, traders and roasters around the world are facing losses and uncertainty following reports Colombian coffee farmers have failed to deliver one million bags of beans, equal to around 10% of the country's crop.

World coffee prices have soared 55% this year, the highest in seven years, mainly due to coffee farmers in the world’s largest coffee producer, Brazil being severely impacted by droughts, unseasonable frosts and Covid-19 disruption.

Those high prices have led to many Colombian farmers defaulting on sales previously agreed when prices were much lower in order to re-sell at higher rates.

A senior green coffee trader told Reuters that several global trading houses are facing losses of $8-10 million each on undelivered coffee. The defaults are likely to exacerbate price spikes and supply chain problems to coffee consuming markets. 

The source also stated that many global roasters are planning to alter single origin branding pertaining to Colombian coffee due to the sourcing problems. 

Defaults on coffee orders are also hitting Colombia’s domestic market, with the country’s coffee trade body, the National Federation of Coffee Growers of Colombia (FNC), which handles 20% of the country's annual coffee exports, reporting losses. 

"I can tell you there are few Colombian exporters not suffering [from defaults]. All the major trade houses and also the federation as a major exporter, we're all suffering [losses]... when a grower doesn't deliver, the whole chain gets stuck losing money," said FNC head Roberto Velez.

According to the Reuters report, the federation has given Colombian farmers at least another year to deliver the coffee, which could force the industry body to rely on bail-out funds from the government if farmers still fail to deliver.

Colombia is the world’s second largest producer of Arabica coffee and reached an output of 13.9 million 60kg bags last year.  

Around 550,000 Colombian families make their living growing coffee. The Andean country is the third-largest coffee producer in the world after Brazil and Vietnam.