Coffee Price Stabilization Fund
On a day considered historic, the Coffee Price Stabilization Fund (FEPC) was launched on February 19, 2020 with the aim of shielding Colombian coffee growers against the ups and downs of international coffee prices.
At its inaugural session, the FEPC National Committee, made up of the Ministers of Finance and Public Credit; Agriculture and Rural Development; and Commerce, Industry and Tourism, and the National Planning director, as well as the 15 highest coffee grower representatives, approved the regulations of the Fund, the operation of its governing body, and the functions of the Technical Secretariat.
This novel price protection instrument started with a budget of COP 218 billion, with resources allocated by the Government from the national budget and by coffee farmers themselves through the National Coffee Fund (FoNC), the parafiscal account fed on the coffee contribution (a tax paid for each pound of coffee exported).
Other financing sources contemplated are contributions by third-party industry actors interested in sustainability of Colombian coffee farming and the Nation’s royalties.
FEPC purpose
To adopt the necessary mechanisms that contribute to stabilizing Colombian coffee growers’ income.
What is the commodity subject to stabilization?
The commodity subject to stabilization is Colombian mild Arabica coffee.
What are the prices subject to stabilization?
Domestic prices of Colombian coffee denominated in Colombian pesos and published by the FNC.
What is the FEPC’s governing body
and its functions?
The FEPC’s governing body is the National Committee, made up of national Government representatives and the FNC highest representatives. Its main duties are to:
- Determine the policies and guidelines for management of the FEPC.
- Issue the FEPC operation rules and the mechanisms to be adopted for its operation.
- Determine the price parameters and procedures based on which the respective stabilization mechanisms will be activated.
- Regulate how registered coffee sales must be supported for stabilization and compensation payments that may arise.
- Determine the calculation method for the mechanisms and prices subject to stabilization established in Law 1969 of 2019 and designate the Technical Secretariat that will be formed as provided in article 44 of Law 101 of 1993.
What role do the stabilization mechanisms play?
The stabilization mechanisms aim to fulfill the FEPC’s purpose, that is, to contribute to stabilizing Colombian coffee growers’ income.
To achieve this, the FEPC will provide two types of stabilization mechanisms:
- Price stabilization: it seeks to compensate coffee growers when coffee prices in Colombia are extremely low.
- Income stabilization: it seeks to remunerate growers when expected income from the sale of their coffee may be affected by climate, natural, and sanitary effects or coffee sales with future delivery.
What is the FEPC and what it is not?
- The FEPC is a special account, without legal personality, administered, like the National Coffee Fund, by the FNC.
- The FEPC and the National Coffee Fund are independent, so they don’t have any relationship in the way they operate.
- The FEPC’s resources don’t belong to the National Coffee Fund, although the latter can make contributions to the FEPC.
- The FEPC’s resources are of public nature and those of the National Coffee Fund are of parafiscal nature.
- The FEPC, like the National Coffee Fund, has limited resources for its operation.