Januar 2019

Green Coffee Quality Report

Review and Expectations


Brazil: Warm temperatures between 20 and 28 degrees with sun shine in almost all areas. Rains are falling over main coffee areas but are typical summer rains with irregular coverage. Amounts of rains so far this month are usual, except Zona da Mata that got only little rains so far. On Conilons areas in the north of Espirito Santo and South of Bahia (a huge coffee trees concentration) no rains occurred this month yet. Although big part of the Conilons farms are irrigated, rains are most welcome to develop the cherries at this last stage of the crop. The cumulative rainfall since August 2018 is normal or even slightly above normal. IBGE (Statistics Bureau´s agency) estimated 19/20 crop at 53.4 mio. bags, down 10.8% from the 59.6 mio. bags of 18/19 crop. Arabica should produce 38.2 mio. bags,14.9% less than the 44.8 mio. of 18/19 crop. The planted area is 1.7 mio. hectares but only 1.5 mio. hectares are into production. Minas Gerais, by far the largest producer of Arabica produces 70% total crop, is expected to harvest 27.3 mio bags.  While IBGE seems within the range of the available Arabica estimates, they seem to be very conservative on Conilon´s crop size of 15.2 mio. bags only. Trade sources estimate Conilon´s production at least between 19 and 20 mio. bags. Comexim released their first new crop estimate is at 58.2 mio. bags, with Arabica falling to 38.4 mio. bags and Conilon reaching a record of 19.8 mio. bags. The reduction on Arabica productions will be more noticeable in Zona da Mata (from 8.5 mio. bags to 5.5 mio. bags) and Espírito Santo (from 4 to 3 mio. bags), while in South of Minas, Cerrado and Sao Paulo production it will likely drop between 12% and 15%. CONAB made available their first 19/10 crop estimate as well. Their average number is 52.5 mio bags (50.48/54.58 range) with an Arabica average at 37.14 mio. bags (36.12/38.16) and Conilon average at 15.35 mio. bags (14.36/16.33). While their Arabica average figure of 37.2 mio. bags looks similar to trade estimates, their Conilons 15.4 mio. bags estimate is far below of 20 mio. bags estimated by most of traders and local dealers. Cecafe released the final 2018 export figures. December 2018 closed with 3.7 mio. bags shipped being 3.2 mio. bags of Arabica, 168 thousand bags of Conilons and 348 thousand bags equivalent to instant coffee. During 2018, a total of 35.2 mio. bags were exported to 120 consumers and producer´s countries around the world. However the Top 10 importer´s countries represent 60% of total Brazilian shipments. The 2018 revenue from coffee sales reached US 5.1 Billion Dollars. 
Colombia: Weather remains dry. The main crop flow in the eje cafetero is coming slowly to an end, still some discrete volumes are around. Weather remains important for the new crop development, so far there are no concerns. Colombia continued during 2018 the rejuvenation of its coffee park, with the result that 80% isnow rust resistant. FNC reported coffee production for 2018 at 13.55 mio. bags of 60 kgs. This is 4.5 % lower than the year before. Exports stand at 12.8 mio. bags (-1.4% vs ’17). In the meantime, imports of green coffees increased.

Costa Rica: Weather patterns are normal with some dryer forecasts. This weather is perfect for the picking season. As a result of an extremely late crop, unofficial estimates foresee current crop 20% below last year. If such figure is confirmed, this will result in the lowest crop in 40 years. (1.2-1.3 m.io bags).

Honduras: 44% crop advancement in low areas (< 1000 masl), 26% crop advanced in medium (1000 to 1300 masl), 4% crop advanced in high areas. Due to the abundant rains at the end of the year the maturation was massive and now the parchment inflow is huge and the curing mills work at a 100%. It is estimated that around 40% of the new crop are already sold. On the other hand, there is some congestion with the shipping companies with lack of space for immediate and nearby shipments. Exports are 12% below last year (487k 60 kg bags vs.  551k 60 kg bags  as of Dec 20). The exporters talk about 10 mio. quintals (46 Kg) crop, while the IHCAFE estimates 10.5 to 11.0 mio. quintals. Top 5 export destinations in 60kg bags are: USA 83k, Germany 76k, Belgium 66k, Colombia 60k and UK with 30k. Producers/intermediaries do not wanto to sell at these price levels, if these prices persist many producers will abandon there farms.

Nicaragua: 18/19 crop with a 52% estimated harvest advancement to date in general for Arabica coffee and 70% estimated advancement for Robusta coffee. Low altitude areas with 65% estimated advancement to date. Mid-high altitude regions now with a 40% harvest advancement to date. Producers are suffering from a lack of financing resources and a shortage of labor like in other CA countries. Weather reports have been showing ideal conditions and development of the beans. The weather has not been a problem during the harvest but it was during the flowering period, which created the need of several cuts during the harvesting period. In summary it is expected that the production would suffer a reduction of 25 to 30% with respect to the year 2018, which was 3.1 mio. quintals (2.06 mio. bags 69 kg) and according to the producers, the biggest problem will not be this year but the one that comes at the end of 2019.

Mexico: Exporters do estimate the crop at 3.5 mio. bags of 69 Kg. The quality is good, the harvesting is already advanced and it is estimated to finish by the first weeks of March.

Guatemala: The flow of coffee is slowly picking up and the weather has been favourable for harvesting and drying. 18/19 crop with a 40% harvesting advancement to date in general for the entire. Low altitude areas have completed harvesting, medium altitude areas are almost done (96%). 38% are already harvested in high altitude areas. Quality is fair in general. Yields are high, although below last season likely impacted by the weather last year and less fertilizer application at low ICE Arabica levels. The peak of the internal flow is expected to be very strong and concentrated. Currently no major problems with workforce availability  but the situation has to be monitored.

Peru: Overall very quiet. Focus is shifting from selling the last bits and pieces to the farm husbandry. Weather is sunny and warm and the focus is fully on the new crop preparation.

Kenya: Dry mills are receiving parchment and milling is in full swing. Weather remains dry and warm as expected for this time of the year. Some more estates bring their coffees to market, as well as a few cooperatives. The bulk of the cooperatives however are only now in the process of delivering parchment coffee to dry mills which have been rather unexpectedly full of the average qualities. Estates are well into their conversion and pruning cycles in preparation for the rains which are anticipated to start during March or April. Larger estates will most likely need to irrigate within the coming month of February in order to nourish the crop and provoke a flowering for their late crop. Only the highest altitude farmers will still be harvesting bits and pieces, the crop is practically all off the trees now. Logistics are running relatively smooth, containers are available and the train linkage to port is working well.

Ethiopia: Washed Arabica: Yirgacheffe crop is already finished, while Sidamo harvest is about 70% completed. In Guji and Limu more than 50% are harvested. It is expected that by the end of January, 100 % of washed Arabica will be harvested. With the new regulation  in place, a good flow of parchment is going directly from upcountry to the exporters in Addis Addis without going through the ECX. Quality and volume so far is positive. However with the low level of NY, and the holiday season in consuming countries, new business on the export are still very limited. Natural Arabica: A few low land qualities of new crop are available  from Bonga and Gofa. However the flow of coffee for new crop natural to the ECX is expected to take place in volume in February and March. Prices for current and next crop offered by exporters translated into differential versus are still in positive territories. This is reflecting not only the lack of natural coffee available at ECX for crop 17/18, but also the lack of appetite from exporters to sell new crop short at big losses with might not be compensated by their import business.

Tanzania: Quality in the South is declining whereas the North has still some interesting lots coming through. Quality has dropped significantly, only the North is offering FAQ qualities. Rains across the entire country. Auction- The big bulk is still from Mbinga where they have enjoyed a very nice on-cycle crop this year. The quality is a mixed bag as expected and the higher-end qualities are now getting scarce. Also, the mainstream qualities are deteriorating and Grinders/Naturals are taking over.

Uganda: Harvesting is complete in all Arabica regions. Farmers and intermediaries are holding their parchment with the hope of better prices. Exporters expect activities to pick up soon as farmers are willing to sell before scools open. The cherries of the fly crop in Rwenzori starting to ripen. Fly crop harvest to be expected in 2 weeks. Unseasonable rainfall in Uganda’s coffee regions this month is likely to enhance bean development for the harvest expected from April to May. Uganda may produce 5.8 mio. 60 kg bags in the 12 months through September, according to the Uganda Coffee Development Authority.

India: The Robusta crop is roughly 35% harvested easing the nearby tightness. The Coffee Board of India has reduced their earlier new coffee crop harvest estimate by 16%, to 5.23 mio. bags, on the back of damaging rains in Karnataka and Kerala, last July-August.

Indonesia: Heavy rains continue to batter the coffee growing regions, although limited damage is reported for next crop. Given two consecutive smaller crops, we can expect higher productive potential for the coming crop. The balance of the crop remains with the local agents who seem reluctant to see at these levels keeping prices firm. Coffee is one of the best ways to earn a decent income in the agricultural sector and is grown in nearly all the islands across the Indonesian archipelago. Sumatra Island dominates production with 74.2% of Indonesian coffee grown here; with the largest Robusta production in Bengkulu, Lampung and South Sumatra areas. All the rest of Arabica and Robusta is distributed in Sulawesi (9.0%), Java (8.3%), Nusa Tenggara (5.8%), Kalimantan (2.0%), and Maluku and Papua (0.6%).  After Indonesia reached independence on the 17th. August 1945, farmers gained more control in coffee cultivation as the government reduced its role in the coffee plantation. Today, in Indonesia around 96% of the coffee growing areas are smallholder farm cultivated in monoculture and not intensively managed. Coffee yield is still relatively low i.e. 500 – 800 kg/hectare/year which is around 60% of potential production. This is due to the use of underproductive coffee varieties and some of the coffee trees being already too old.

PNG: Fly crop harvesting is noticeable in the Western Highlands. Reasonable volumes of parchment are being offered. Flycrop flow should continue through January and into February. Regular rains are reported as expected during the wet season period.

Vietnam: The Robusta harvest is now complete. Mills and exporters saw good flow, as middlemen turned over stocks and farmers sold additional coffee ahead of Chinese New Year. Exporters start to see the first labourers make their way home for Tet holiday. The re-juvenation efforts of the Robusta plantations and the planting of new higher yielding hybrids  is beginning to show. The on/off cycle differences are reducing and the 18/19 crop could well be another record crop. A side effect of these new Robusta hybrids is that, other than the yield, the screen size is increasing. This is especially apparent in the Gr2 where the reduced availability of smaller screens is pushing the average screen size up. Due to excellent
weather and an increase in the local soluble production capacity the availablity of lowgrade Robusta for FOB shipment is becoming a challenge. The 18/19 Arabica crop, initially estimated to be down 4% vs. the 17/18 crop,  could end up not reaching this number.
Farmers, disappointed by yet another year of low  prices, are reducing the picking rounds letting the tree carry the coffee. Needless to say this will impact both volume and quality.

China: After some rain, dry and sunny weather has helped the harvest to process. However, due to the decreased production this year, the local activity is still very limited. Farmers have completed around 40–50% of the harvest. Most of them expecting the production to be lowered by 30-40% compared to last crop.

Various: Coffee consumption in China has risen by a staggering 1.032% over the last ten years, from 300,000 bags in 2008/09 to 3.8 million bags in 2017/18, according to recent data reported in the Brazilian review Negócio Café. While instant coffee is still dominating the Chinese coffee market, compared to other coffee formats drunken at home, a Mintel research indicates that it is losing both consumer interest and its share in the market, something that’s quite inevitable as consumers trade up for better coffee offerings. In fact, 32% of the chinese consumers said that they were drinking instant coffee in 2016; this figure dropped to 26% in 2017. Starbucks announced that going forward, the company aims to expand it’s retail store portfolio by approximately 6-7% new units each year at it’s biennial Investor Conference held in New York on 13 December. Starbucks’s leadership team, including CEO Kevin Johnson, told analysts and investors at the conference that the company also aims to grow same store sales by 3-4% per year. Starbucks seems to have slowed down plans to open a thousand Reserve coffee bars. “One thousand was an aspiration,” said the company’s Ceo Kevin Johnson in an interview with The Wall Street Journal. Instead, Starbucks will test 6-10 Reserve stores to see if they can generate the necessary returns before they go any further. The Coca-Cola Company has completed it’s acquisition of Costa Limited from Whitbread PLC: putting Coca-Cola in charge of the world’s second largest coffee chain. The $4.9 bln. transaction has been completed following the necessary approvals from regulatory authorities in the EU and China. The acquisition of Costa helps Coca-Cola spring into the global coffee category: which is growing at around 6% a year and is valued at $0.5 trillion. In Antwerp, which has the largest inventory of coffee in the world, stocks have risen by 44% since the beginning of this year. Hamburg, which also has large coffee stocks, has also seen a 28% increase in volumes this year. While coffee availability is good in Europe, stocks are decreasing in North America. In Miami, New Orleans and New York, stocks have fallen by an average of 37% since the beginning of 2018, while in Houston the level of inventories has remained almost stable over the same period. On balance, global inventories have increased by 24% since 1st January 2018 and this improvement in the availability of coffee has had a downward effect on prices. JAB Holding Co.'s takeovers have made it one of the global retail sector’s most acquisitive presences in recent years. Chairman Bart Becht, part of the triumvirate that led the company’s $49.5 bln. of deals since 2012(1), will retire this year. Former executives from Anheuser-Busch InBev and Mars Inc. will join in his stead. What’s concerning is some of the reported background to that departure. Becht stepped down after failing to convince JAB to scale back its takeover ambitions and focus on operational improvements, the Financial Times reported. Brazil’s largest coffee roaster Tres Coracoes is on the prowl for acquisitions in less-consolidated South American markets. Tres Coracoes is looking to buy coffee-roasting companies in Argentina, Chile, Uruguay, Paraguay and Bolivia, its president, Pedro Lima, said. In Brazil, Tres Coracoes accounts for 27% of the roasted-coffee market, ahead of Dutch giant Jacob Douwe Egbert and Germany’s Melitta, the second- and third-ranked players, respectively.

Sources: Volcafe, Flavour, ICONA, Taylor Winch (KEN), Mercon

Herbst 2016

Carlo Delfs im Interview für den Lyreco Pausenmanager 3/2016:

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