The 2006/2007 coffee production estimate for Colombia has been reduced slightly based on updated information from the Federation of Coffee producers. There is no indication at this time that severe rains in the main coffee producing region that caused flash flooding has significantly impacted production. In 2007/2008, the moderate rate of increase is expected to continue resulting in Colombia's coffee production reaching 12.4 million bags, no change from our previous forecast. The major reason for the expected increase in production is due to continued expansion of planted area in the southern region of the Central coffee area in the Department of Huila.
Colombia’s coffee exports for 2006/2007 were reduced by 100,000 bags due to updated endof- year information from the Coffee Federation. In spite of this reduction, 2006/2007 exports represent about a 5 percent increase from the previous year. This trend is expected to continue in 2007/2008 where our forecast remains unchanged at approximately 11.7 million bags. International demand for high-quality coffee is expected to remain strong and offset the increased costs associated with the weak dollar and rising production costs. There were no changes in our forecast of processed coffee, which will capture a greater share of total exports in 2007/2008. The United States will continue to be the number one importer of Colombian coffee accounting for about 34 percent of total Colombian exports.
The 2007/2008 domestic consumption of coffee in Colombia was reduced as a result of lower expected stocks due to increased exports. While coffee imports will continue to play an important role in meeting Colombia’s domestic coffee demand, our forecast for 2007/2008 has been reduced due to increased domestic production.
On the policy side, according to Colombian coffee institutions, the United States joining the International Coffee Organization has had a positive effect on prices for overall coffee-quality in the international market. This in turn will help Colombia expand to new markets and increase its presence in existing markets. Colombia also announced a new Coffee Renovation initiative to support small farmers, which will be implemented in early 2008. This policy will grant credit to small coffee producers at lower interest rates along with the forgiveness of up to 40 percent of the principal. This program is expected to renovate 300,000 hectares of coffee over five years.