Bogota, Oct 29 - The surge in the Colombian peso against the U.S. dollar this year is squeezing coffee exporters' income and wiping out the windfall that farmers were hoping to get from a rise in coffee prices.
The increase in production costs due to high fertilizer prices has also eroded revenues of producers and exporters.
Central bank measures aimed at weakening the peso, plus a global rally in the greenback, have provided some relief to the Andean country's coffee industry. But producers grumble that the peso remains way too strong.
Friday's central bank decision to buy as much as $1.5 billion in dollars and peso-denominated treasury bonds, known as TES, between now and the end of the year has contributed to a more than 5 percent weakening of the peso in recent days.
But the local currency remains 11.87 percent stronger against the dollar this year. It hit its strongest level on Oct. 14 when it ended at 1,825.00 to the dollar, a level not seen since Aug. 12, 2008.
Colombian exporters -- including not only coffee producers but industrial manufacturers, mining companies, oil companies and flower growers -- get paid in dollars.
This slices into their profits when the peso rises.
On Wednesday the bank said it discontinued its policy of automatically intervening in the foreign exchange market every time there is a 5 percent fluctuation in the exchange rate.
The move, welcomed by exporters, was meant to allow the local currency to fall freely against the greenback.
Coffee exporters, meanwhile, claim they are losing 25 percent of their income so far this year as a result of the peso's strength.
"When the peso hit 1,800 I was losing around 25 percent of my income because earlier this year I closed future coffee contracts when the peso traded at around 2,200," said Ernesto Garces, owner of the Medellin-based exporter Trilladora Union, one of the country's top 10 coffee exporters.
Trilladora Union sold 120,000 60-kilogram bags last year, mainly to the United States and Europe. Garces expects to sell around 150,000 bags this year.
The same situation occurred with Cafe del Quindio, an exporter of specialty coffees to Japan and Chile.
Were it not for high international prices fetched by gourmet coffee, Cafe del Quindio would be losing more money, said Nubia Mota, general manager of Cafe del Quindio, which sells 7,000 kilograms per month of specialty coffees to Japan and 3,000 kilograms per month of gourmet coffee to Chile.
Even though Cafe del Quindio receives 7 percent more for its washed Arabica beans than Arabica prices traded at the ICE Futures US Market in New York, the company still lost 15 percent of its annual income of $350,000.
Mota said she has been forced to pay coffee growers more for their beans as fertilizer prices have as much as doubled in less than a year as a result of high demand and rising oil and natural gas prices.
Fertilizer prices have softened recently but are still "outrageous," Garces said.
Wednesday's closing peso price of 2,021.90 is not good enough for exporters who want to see the currency at 2,300 to 2,400 per greenback in order to recover income lost due to the anemic dollar over the last year.
"If it does not hit those levels, I won't have any other option than increase my prices to my Russian buyer," Mota said.