Edgar A. Cordero President Colombian Coffee Federation ...Sep 27, 2011 · (FNC) The FNC is a...

Edgar A. Cordero gExecutive Vice

PresidentPresident Colombian Coffee Federation IncFederation, Inc.

© Copyright FNC 2011

September 27th, 2011

Colombian Coffee Grower’s Federation (FNC)(FNC)

The FNC is a private non-profit organization, founded in 1927by the Colombian coffee growersby the Colombian coffee growers

Mission Statement

To improve the living standards of nearly 566,000 coffee growers and their families through an effectivetheir families through an effective,

democratic and representative organization

VisionTo obtain a competitive and

sustainable coffee sector; strengthensustainable coffee sector; strengthen the social network in coffee zones and maintain the Colombian coffee

th b t ff i th ld

SEPTEMBER 27th, 2011 © Copyright FNC 20112

as the best coffee in the world

A Democratic OrganizationA Democratic Organization

Every four years the coffee growers f C l bi l t th i l l d

National Congress of Coffee growers

of Colombia elect their local and national representatives. A full 65%

of the coffee growers voted in the

Board of directors

National Committee

recent 2010 election. A new election will take place in 2014

Regional Committees

Municipal Committees

15

356Municipal Committees 356Coffee Municipalities 587

Federated Coffee Federated Coffee GrowersGrowers More than 500,000


Coffee Growers IDCoffee Growers ID

Colombian Coffee Growers:89% have less than 3 hectares89% have less than 3 hectares

COFFEE GROWERSCLASSIFICATION BY COFFEE AREA

More

CLASSIFICATION BY COFFEE AREA

4 77%4 77%

0,49%0,49%More than

20 Hect.

5,79%5,79%

4,77%4,77%5,1 a 20 Hect.

3 1 a 5 Hect

28,36%28,36%

5,79%5,79%3,1 a 5 Hect.

1 a 3 Hect.

60,59%60,59%Less than 1 Hect.


Colombian Coffee Growers:89% have less than 7.6 acres

The coffee regions are vulnerable communities:

COFFEE GROWERSCOMPOSITION BY COFFEE AREAS

0,49%0,49%More than

4,77%4,77%

50 acres

12.6 to 50 acres

5,79%5,79%7.7 to 12.5 acres

60 59%60 59%

28,36%28,36%2.5 to 7.6 acres


60,59%60,59%Less than 2.5 acres

National Coffee FundInstrument to improve growers living p g gstandards

The National Coffee Fund is a treasury t d i i t d b th F d tiaccount, administered by the Federation,

created in 1940 to protect and promote the Colombian coffee industry.


How does the National Coffee Fundwork?work?

INCOMES EXPENSES

NATIONAL

Coffee

Purchase Coffee

Commercialization

NATIONAL COFFEE FUND

growers contributions

CommercializationCosts

Administration Costs

Coffee Sales

Services to the coffee producer (extension research(extension, research, quality controls, promotion and advertising, among


advertising, among others)

There is a binding agreement between the National Government and the FNC toNational Government and the FNC to administer the National Coffee Fund

CONTRACTCOLOMBIAN

GOVERNMENTGO

NATIONAL COFFEE FUND

$SEPTEMBER 27th, 2011 © Copyright FNC 20118

$

The Fund performs the following activities through its administrative agent the FNC:

Guarantees the purchase of coffee.

through its administrative agent, the FNC:

Provides warehousing, sorting, processing and packaging of coffee beans.

Provides commercialization (Domestically and internationally) of coffee beans and freeze-dried coffee.y)

Provides public goods and institutional services Worldwide marketing, promotion and advertising Enforcing quality standards Research and development

Technical assistance to farmers

Invests in the development and competitiveness of the


domestic coffee industry.

Colombian Coffee Grower’s Federation

• Technological Research - Cenicafé

• Execution of the Purchase Guarantee

• Technical assistance through the extension serviceTechnical assistance through the extension service

• Quality standards for exported coffees

• Advertising campaigns• Advertising campaigns

• Social and physical investments in the coffee regions

M t f th N ti l C ff F d• Management of the National Coffee Fund


Purchase GuaranteePurchase Guarantee

A network of about 500 cooperative purchasing points, throughout the Colombian coffee region, that ensures every grower will find a b f hi ff t t tbuyer for his coffee at a transparent and socially responsible price.


THE DIFFERENTIALTHE DIFFERENTIAL

• A coffee differential is the substitution price, expressed in premiums and discounts of oneexpressed in premiums and discounts, of one type of coffee for another.

• For Arabica coffees we normally use the NY “C” as a peg or benchmark but in reality we are determining what the price of one type of coffee should be compared to another type of coffee, including the perceived average value of the certified stocks.


Colombian Coffee UGQ Diferential VS Central America and Brasil

84

Colombian Coffee UGQ Diferential VS Central America and Brasil

[ US¢ / lb ]Colombia UGQ

54

64

74 Colombia UGQ

Guatemala HB

Costa Rica HB

El Salvador HG

2124

34

44 Honduras HG

Mexico Lavado

Brasil Santos 2/3

15.58.1

21

6.9

0 92.54

14

24

0,9

-8.7

-26

-16

-6

26

ene-

06m

ar-0

6m

ay-0

6ju

l-06

sep-

06no

v-06

ene-

07m

ar-0

7m

ay-0

7ju

l-07

sep-

07no

v-07

ene-

08m

ar-0

8m

ay-0

8ju

l-08

sep-

08no

v-08

ene-

09m

ar-0

9m

ay-0

9ju

l-09

sep-

09no

v-09

ene-

10m

ar-1

0m

ay-1

0ju

l-10

sep-

10no

v-10

ene-

11m

ar-1

1m

ay-1

1ju

l-11

sep-

11

Source: Complete Coffee Coverage Inteligencia Competitiva FNC


Source: Complete Coffee Coverage - Inteligencia Competitiva - FNC

Differentials

100Diferencial Diario Colombia UGQ VS Centro América

2009 ‐11

ColombiaUGQ80

Colombia UGQDiferencial Guatemala HBCosta Rica HBDiferencial Mexico LavadoDiferencial Honduras HG

40

60

¢/lb

Diferencial Honduras HGDiferencial Salvador HG

Fuente: Complete Coffee Coverage - Inteligencia Competitiva - FNC

20

40

US

0

‐20

‐97 97 ‐98 98 ‐99 99 ‐00 00 ‐01 01 ‐02 02 ‐03 03 ‐04 04 ‐05 05 ‐06 06 ‐07 07 ‐08 08 ‐09 09 ‐10 10 ‐11 11


06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

06‐ene

‐

06‐jul‐

C l bi C ff UGQ Dif i l VS C l A i Mild A bi

45

50Colombian Coffee UGQ Diferential VS Central America Mild Arabicas

Differentials ‐ 2011 [ US¢/lb ]

Colombia UGQ Diferencial Guatemala HB

35

40 Costa Rica HB Diferencial Mexico Lavado

Diferencial Honduras HG Diferencial Salvador HG

20 5

25

30

16

10 5

20.5

15

20

10.5

4.5

1

9

5

10

10

1‐en

e‐11

9‐en

e‐11

7‐en

e‐11

5‐en

e‐11

2‐feb‐11

0‐feb‐11

8‐feb‐11

6‐feb‐11

6‐mar‐11

4‐mar‐11

2‐mar‐11

0‐mar‐11

7‐abr‐11

5‐abr‐11

3‐abr‐11

‐may‐11

‐may‐11

‐may‐11

‐may‐11

2‐jun‐11

0‐jun‐11

8‐jun‐11

6‐jun‐11

04‐ju

l‐11

12‐ju

l‐11

20‐ju

l‐11

28‐ju

l‐11

5‐ago‐11

3‐ago‐11

1‐ago‐11

9‐ago‐11

6‐sep‐11

4‐sep‐11


01 09 17 25 02 10 18 26 06 14 22 30 07 15 23 01 09 17 25 0 2 10 18 26 0 1 2 2 05 13 21 29 06 14

Source: Complete Coffee Coverage - Inteligencia Competitiva - FNC

350 00

ICO Indicator Prices (Monthly Average)[US Cents/lb] 2000‐11

300,00

350,00

200,00

250,00 Suaves Colombianos

Otros Suaves

Robusta

Naturales Brasileños

100 00

150,00

US¢/lb

50,00

100,00

0,00

ene‐00

jul‐0

0

ene‐01

jul‐0

1

ene‐02

jul‐0

2

ene‐03

jul‐0

3

ene‐04

jul‐0

4

ene‐05

jul‐0

5

ene‐06

jul‐0

6

ene‐07

jul‐0

7

ene‐08

jul‐0

8

ene‐09

jul‐0

9

ene‐10

jul‐1

0

ene‐11

jul‐1

1


e e e e e e e e e e e e

Source: OIC Inteligencia Competitiva - FNC

BLACK SCHOLES FORMULABLACK SCHOLES FORMULA

C = S N(d1) - X e-rT N(d2) hWhere:

C = price of the call optionS = price of the underlying stock or assetX = option exercise price or strike pricer = risk-free interest rateT = current time until expirationN() = area under the normal curved1 = [ ln(S/X) + (r + σ2/2) T ] / σ T1/2

d2 = d1 - σ T1/2

σ = volatility of returns of underlying asset


Edgar A. Cordero President Colombian Coffee Federation ...Sep 27, 2011 · (FNC) The FNC is a...

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