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Colombia Agribusiness Report Q1 2009
Business Monitor International, Feb 2009, Pages: 43
This Colombia Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Colombia's agribusiness service.
Colombia's agricultural sector has been blighted by the poor security situation in large parts of the country. Now with security improving under President Álvaro Uribe there is hope for new investment in the sector. In thisnew Colombia Agribusiness Report for Q1 2009 the publisher examines the opportunities and threats to the industry.
Agriculture contributes more than 10% to Colombia's GDP and employs around 5mn people, almost a quarter of the labour force. A large proportion of those supported by agriculture are smallholder peasant and indigenous farmers who farm around 65% of the agricultural land. Most of this group live below the poverty line. Labourers on plantations, particularly cane cutters, also struggle to live on the wages available, with conditions often described as similar to slavery.
The threat that the poor conditions endured by labourers poses to large-scale agriculture in Colombia was shown in 2008 by an almost two-month-long strike by cane cutters, which shut down a large proportion of the country's valuable sugar and ethanol production sector. Eight of Colombia's 14 sugar mills were forced to completely halt production while the strike was on, as were four of the country's five ethanol plants. The strike was estimated to have caused cuts in sugar production of 4,700 tonnes per day.
With the strikes having strengthened the unions, if further damaging industrial action is to be avoided consideration will have to be given to the situation of workers in rural areas. If large sections of society feel left behind by Colombia's growth, then more disruption can be expected. Apart from poor conditions, another threat for agricultural workers is mechanization. While the increasing mechanisation of Colombian agriculture will likely lead to improved efficiency, if the process is to run smoothly, thought will have to be given to employment for laid off workers. Despite the poor conditions for cane cutters, as the only source of income in many areas, protests and further industrial action can be expected if large numbers of workers are laid off.
If labour problems can be overcome, the future for sugar cane production in Colombia looks bright. While sugar production has declined in the last few years, this is due to ethanol production rather than in a reduction of cane grown. As domestic ethanol production is still unable to fill the government-mandated minimum of 10% ethanol content in gasoline, the market for cane will remain strong, increasing incentives to invest in production. With the government mulling over raising the level of ethanol in gasoline even higher - though admittedly this seems less likely since the slump in oil prices - the domestic demand for cane could see further increases. The climate in the cane growing area of Vallle del Cauca allows cane to be grown year round with yields among the highest in the world. This combined with strong demand should guarantee strong growth in cane production over the next decade.
Though prices on the world market fell along with other commodities in the second half of 2008, the future for coffee production in Colombia also looks bright. Under the guidance of the National Federation of Coffee Growers of Colombia (Federacafe), Colombian coffee has been promoted around the world for its high quality. The Ministry of Agriculture is now aiming to increase production to 17mn 60kg bags by 2014 from its 2008 level of 12.40mn bags. While the publisher thinks this is a little optimistic, the publisher does forecast strong growth for coffee production over their forecast period to 2012 of 12.8%. Production will be aided by Federacafe's programmes to help farmers, which include credit and minimum price insurance.
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