Notes on the Global Colombian Coffee Production Chain. */

Colombian coffee exporters 1/ buy green coffee from Colombian producers and send it to Europe or the United States, having completed their work when the bean arrives satisfactorily at the destination port 2/. There, other intermediaries begin the bean processing chain until it is packaged and distributed for final consumption.

According to some studies on coffee, the price of a pound of Colombian coffee is between 15 and 20 dollars in Europe and the United States 3/ of which the coffee exporter receives 3.5 dollars per pound and the bean producers receive 2.5 dollars per pound (translated into pesos). Transport to the Colombian port costs 1.5 dollars per pound. This adds up to 7.5 dollars and the rest of the 15 dollars or 7.5 dollars per pound is for the market intermediaries in the destination country.

In cases where the exporter (multinational companies) buys directly from the Colombian producer and in turn packages and distributes it in Europe or the United States, they are entitled to a larger share of those 15 dollars per pound, since they receive 11 dollars, which is the exporter's margin plus the margin of the intermediaries in those countries.

Therefore, in Colombia, the coffee producer receives, as mentioned before, 2.5 dollars per pound of coffee, which is equivalent to 16% of the price of the pound sold in Europe. The other 84% is shared between the exporter and the European intermediaries.

On the other hand, studies say that the consumer of coffee shops (or bakeries) in Europe and the United States pays between 2 and 4 dollars per cup for an American style coffee, and a pound of coffee allows them to obtain an average of 40 cups, which implies a gross income of between 80 and 160 dollars per pound.

The observations for coffee producers in Colombia revolve around the relatively low income within the coffee production chain, a situation that worsens during periods when coffee prices are as low as 1 dollar per pound on the New York Stock Exchange (in april it was 1.86).

Also, the margin for each pound of exported coffee that corresponds to exporting companies of 3.5 dollars per pound (which is added to the purchase price to the producer plus operational costs, resulting in a price per pound of 7.5 dollars) could be lowered towards producers so that they also participate in this export activity and its returns as associated participants.

Exporting companies that mostly only place the product in foreign ports could enter the internal distribution chains of countries in Europe and the United States (including coffee shops if possible) and thus also participate in the margins that coffee leaves in the destination countries.

The vertical integration of coffee producers with exporting companies, which in turn market the product within Europe and the United States, constitutes the added value that Colombia can receive for a product that is currently exported as bags of green coffee beans 4/.

------------------------

1/ The National Federation of Coffee Growers exports 16% of the total and private exporters 84%.

2/ The main ports of destination for coffee exports are New Orleans, New York, Oakland, Baltimore and Charleston with 205.000 bags of coffee, Antwerpen Belgium 86.067, Hamburg Germany 51.378 and Montreal 34.665.

3/ According to the National Federation of Coffee Growers, the main destination for coffee bag exports is the United States 36%, Belgium 9%, Germany 8.5%, Canada 7%, the Netherlands 4% and Japan 4%.

4/ According to the National Federation of Coffee Growers, in september, the volume of exported bags is 907.349 bags of green coffee, and 90.992 bags of roasted, ground and freeze dried coffee, meaning that 91% of total exports are green coffee.

*/ Coffee represents 7% of total Colombian exports according to the official source in the latest information for the month of september. Flowers represent 4%, oil 28%, coal 13% and gold 10%. Therefore, coffee is relatively low as an export product, but within agricultural products it is the first.