Effects of COVID-19 on agribusiness in Colombia
Here is an update of the most relevant developments so far in Colombia related to covid-19 during March and April and the effects on the agricultural sector.
To begin with, Colombia begins its mandatory preventive isolation, which will initially last 19 days, as of Wednesday, March 25th now extended until May 25th .
President Ivan Duque presented a plan of measures to tackle the corona virus in the country in which the government had 1 billion credits for the agricultural sector, its use mainly for working capital, investment and economic reactivation, the goal is that the food production can reach the supply centers of different cities. Also in his statement, President Duque stressed that the National Government is working in coordination with the supply centers to maintain the food supply in the country.
The Minister of Transport makes encouraging statements assuring that food and agro-input imports will be maintained, the ports will be open to receive these goods and the farmers will be able to continue harvesting the land. He also assured that cargo transportation will continue its normal activity.
Agricultural activities exempt frm restrictions during quarantine
The Colombian Association of Seeds and Biotechnology - Acosemillas reported that as a result of the joint work of the unions of the agricultural sector and the National Government, the main activities related to rural production will be exempt from the restrictions established in the national quarantine. The activities allowed during the quarantine are, among others:
The production, packaging, import, export, transport, storage, distribution and labeling of seeds;
The tasks related to the manufacture and transportation of agricultural, fish, livestock and agrochemical inputs and products -fertilizers, pesticides, fungicides, herbicides-; agricultural, fish and livestock products, and animal feed, maintenance of animal health.
The operation of primary and secondary food processing centers, the operation of the processing infrastructure, major and minor irrigation for population and agricultural water supply, and technical assistance. Logistics and transportation of the above activities are guaranteed.
The Colombian Minister of Agriculture and Rural Development, announced the suspension of tariffs on corn, sorghum, and soy to reduce costs.
The 0% tariff for these three products will apply until June 30, 2020, with the possibility of extending the measure for three more months. This measure is taken in order to increase the supply capacity of corn, sorghum and soybeans, since production in Colombia is insufficient. Since the Ministry is also interested in promoting the national production of corn, it will launch a series of incentives for the farmers dedicated to this crop.
Temporary measures in process of certificates
In order to facilitate international trade during the pandemic caused by the Covid-19, the Colombian Agricultural Institute - ICA, continues providing its services in complete normality, like the transit of merchandise and agricultural products, at ports, airports and border crossings of the country. Logistics operations for perishable food containers will be prioritized, both for inspection operations and for cargo removal and subsequent issuance of nationalization certificates.
In addition, ICA will receive the filing of documents at its service points via email, and will issue the certificates through the same system. Lastly, work shifts will be implemented with the minimum number of staff required, so that there is fair staff rotation.
On the other hand, in accordance with the measures adopted by ICA, the National Institute for the Surveillance of Medicines and Food - INVIMA, will also allow the submission of documents in copy and PDF for the processing of inspections of sanitary certificates of goods imported into Colombia.
Fresh cut flowers
The president of the Colombian Association of Flower Exporters, Asocolflores, announced that as a result of the pandemic, national flower exporters had more than 50% of sales scheduled for the remainder of the first half of 2020 canceled. The sector reports an 80% drop in fixed orders in international markets and a 60% reduction in the country.
Flower export activity was partially affected in markets such as Korea, Japan and Italy, mainly. However, the cancellations of orders from the United States, which represents 80% of the total sales of the sector, creates great alarm among flower growers.
One of the most significant challenges facing the industry is to maintain the formal jobs that come from it, on average 140,000 people who have direct contracts. The concern increases understanding that more than 50% of the operation costs of a plantation are given by labor.
The main challenges for the flower industry are:
- To protect the health of all workers;
- To face with the drastic decrease in cash flow due to the drop in sales
- Keeping crops
- To protect the work of 140,000 people (mainly women)
- To have the necessary logistics to be able to export, when there is a market for the products.
- Portfolio Recovery
Due to the health emergency produced by COVID-19, the sector is operating at 25% of its working capacity. The sector cannot stop their operations entirely as they need to keep crops alive to avoid a total collapse. the producers must give it a phytosanitary and agricultural maintenance, so that the plants are in conditions to produce later, when exports resume.
According to the National Federation of Coffee Growers, the last week of March, and the first week of April, mark the beginning of the beans harvest season, which, this year, coincides with the days when the price of loading 125 kilograms is at the highest levels in the history..
However, there is concern in some of the regions because preventive measures against Covid-19 generate restrictions for the movement of pickers in the harvest at this time of year (especially because a great part of rural workers are older than 65 years old). More than 150,000 employees are required from April to June. A total collection of 6.5 million bags is expected.
Furthermore, the FNC seeks to achieve a balance between sanitary prevention and harvesting of crops, for which the orderly and scheduled adoption of sanitary controls is important, by virtue of the transhumance and eventual concentration of collectors by municipality. Thus, the FNC seeks a space with the Ministers of Health and Agriculture to draw up a policy that allows the sanitary management of the harvesting of the harvest (management of barracks and transhumance of harvesters) and to maintain the dynamics of the coffee business.
Currently the poultry sector is facing a crisis, according to the President of the Colombian poultry federation (FENAVI), this is due to a reduction in sales estimated from 35% and up to 50% after the closure of restaurants and grills. That affects the entire national territory, and it is not something occurring only in Colombia, also Peru and Ecuador go through a similar situation according to the spokesman. Chicken meat consumption is up to 50% out of households and popular restaurants do not have delivery services. The majority of the Colombian population is of scarce resources and many do not have refrigeration capacities to keep chicken meat at home, consumption falls for these reasons and leads to accumulated inventories. For this reason, FENAVI requested the Ministry of Agriculture to urgently refund VAT, which are resources of the poultry sector, in accordance with the provisions of the last tax bill.
Oil palm and sugar cane
Biofuel producers relying on palm cultivation are also threatened by the Covid-19 crisis. As the demand for hydrocarbons falls and biodiesel mix being low, producers are seeing a limitation in their storage capacity because this crisis caught them at a peak of production. The oil palm growers union, Fedepalma, sent a letter to the Presidency of the Republic requesting extraordinary measures that allow this agribusiness to face the current economic situation and avoid operational closings and loss of income.
Producers of ethanol made with sugar cane are enduring something similar, as they have very little capacity to store the liquid. The difficulties in selling this alcohol lie in the fact that the wholesale intermediaries are importing it from the US, which despite the exchange rate Colombian peso/USD is still cheaper than the domestic produce.