Green Coffee Quality Report
Review and Expectations
Brazil: Rains during February had an erratic distribution over the coffee belt. The Arabica coffee areas in Sao Paulo/Cerrado and South of Minas got good rains with precipitation amounts above the average The northern part including Zona da Mata and the Arabica areas of South of Espirito Santo got rains slightly below average. However the north of Espirito Santo got rains well below average while South of Bahia saw almost no rain this month. The situation in the Conilon areas is worrying as it has been too dry and too hot this summer. The South of Bahia is the highly concerning area as most plantations are not irrigated and it hasn’t been raining for the last 70 days. In the North of Espirito Santo, where the biggest Conilon production area are located, the picture is not so worrisome as South Bahia is, but it worries as well. Here, most of the Conilon plantations are irrigated but the atmosphere was overall dry. However the rain coverage has been far from the ideal, not uniform. The trees seem to be stressed due to high production, severe heat and long sun exposure. There is a consensus that is very difficult to quantify the potential production damage as basically these abnormal conditions affect the cherries on their final growing stage which should impact the yields. Most of local sources admit a damage so nobody talks about a 20 mio. bag crop anymore. Most of the opinions vary between 5 and 10% damage of the previous potential crop expectation. However, if rains return soon and temperatures get softer, coffee trees might recover and reduce the damage but a full recovery will be very unlikely, as there is not enough time left until the harvesting begins. The largest coffee cooperative in the world, Cooxupé, on a recent Arabica crop survey tour report, forecasts that due to the excessive hot spells between December and January, the Arabica crop should be between 36 and 38 mio. bags, depending on the yield of each region. They also state that due to severe heat the Conilon yield will be lower, therefore this crop year is approaching to 52 mio. bags. Producers keep resisting selling their remaining quantities in these downtrend market conditions. They keep dosing their sales to a minimum necessary therefore forcing exporters to either postpone coverage or pay the asking price levels. Brazil’s National Supply Company has announced that it will release its second survey of the 2019/2020 coffee crop on May 16th. A reduction in CONAB’s forecast is possible as well following reports of damage to the crop due to adverse weather conditions in January of this year. Today, reports began to circulate of significant flowering observed this month, which is not typical for this time during the crop’s development. A flowering this late in the season (flowering generally occurs from September to December) could mean that the crops were stressed due to lack of rainfall and high temperatures and the resumption of rainfall in February triggered an abnormal flowering. ABIC (Brazilian Roasters Association), has reduced their estimate for the domestic consumption to 21 mio. bags per year. These new figures represent a consumption of 6 kg per capita, one of the highest per capita consumption in the world, representing around 13% of world demand. With this performance, Brazil remains at the second in the ranking, just behind US, that drinks equivalent to 23 mio. bags or 14% of the world consumption.
Colombia: Scattered rains in recent weeks after an important dry period have caused good
blossoming in parts of the coffee regions. The availability of parchment is decreasing and differentials are again firmer for the nearby position. Good flowerings were reported for the next main crop, but there are more reports on broca on the other side. Growers are apprehensive of having to face a difficult year yet again, not because of the lack of rains or production, but due to the impact of low prices. With average fertilizer costs increasing by 27%. As a result, the country’s Minister of Agriculture, in recent declarations, stated that the Government is monitoring current prices. FNC has been alerting about the low prices, which do not cover costs and consequently asking the government for subsidies. Furthermore, new ways of trading washed Arabicas are being explored to disconnect it from the NY terminal market. Central American producers are showing more signs of lower output this season, and that could provide an additional longer-term source of support. The FNC is asking the Colombian Government to help with consumption programs for the allocation of a large part of Colombia’s exportable coffee supply to domestic consumption, which since 2018 has sharply dropped. As a benchmark, domestic consumption in Brazil is 6 kg per capita per year, while Colombia does not even reach 2 kg. For this purpose, there are more and more allies, including the national Government and the legislators, who are currently working on a bill that stimulates domestic coffee consumption through purchases by public institutions and the inclusion of the drink in the breakfasts that the Colombian Family Welfare Institute (ICBF) supplies to children.
Costa Rica: Dry season is at it’s peak, as trade winds have disappeared, and temperatures have risen. Emergency zones have been declared due to low water reserves. Historically the rainy season begins in May, yet the official long term forecast indicates two months delay, albeit with little confidence for such long term forecasts.
Honduras: Harvesting activities slowing down and coffee producers are expecting to finish harvesting by the end of March. Quality overall is good. The lack of pickers is still an issue and remains a struggle for producers. Warm summer weather continues, no rains are expected. Honduras will sharply miss it’s coffee export forecast for the 2018/19 (Oct/Sep) season due to a global price slump that has prompted local producers to smuggle coffee or abandon their farms, said Omar Funez, the technical manager of the National Coffee Institute (IHCAFE). IHCAFE said exports from the current harvest may reach 7.2-7.6 mio. 60-kg bags, down sharply.
Guatemala: The flow of coffee has been good and is forecasted to continue till February. Producers and intermediaries are side-lined and lost the selling interest. Although the lower priced coffee continues to be changing hand, most of it is due to pressing needs to purchase the needed inputs. Quality is good, but the yields remain disappointing. Recent weather conditions are very good for processing and drying. Some of the plantations are starting to show the effects of the current above average temperatures and limited rainfall. As the current harvest is drawing to the close the impact from the warm weather is one to watch for the 2019/20 crop.
Peru: In the central area coffee continues to be harvested at the lowest areas. Consistent rains continue throughout all coffee areas. Coffee producers in Peru are abandoning their farms to work on plantations that grow coca, the main ingredient in cocaine, due to slumping coffee prices and delays in certifying organic beans, the country’s main coffee association says. The group, the Junta Nacional del Cafe (JNC), said farmers starting migrating to drug-trafficking regions in December to work on coca plantations, where they can earn more money (between 70 and 120 soles ($21 and $36)) per day. The pace has picked up since then, with hundreds of farmers abandoning their coffee farms daily.
Kenya: Dry mills mostly receiving and milling lower quality grades of parchment at present. Whilst there is still some stock of decent coffee in the pipeline, exporters expect the lower qualities to start making a grand appearance by mid-March. Weather continues dry and hot and rather dusty, scattered downpours in some areas, with hailstorms reported, but nothing substantial yet. Kenyans expect the long rains to start within the coming month of March. Trees continue to stress in this hot weather and prepare themselves for the flowering to come.
Ethiopia: The flow of coffee into Addis warehouses continues, with exporters building up modest stock positions. Most of the Ethiopian exporters were attending AFCA coffee exhibition which took place in Rwanda. Prices at ECX continue to stay firm, and the gap between what exporters are able to offer competitively and purchase price at ECX is widening.
Tanzania: Mbinga has officially finished harvesting and Mbeya has very little volume left over. The flow in the North is also slowing down considerably now, with some excellent coffee still available.
Uganda: Trading activity is picking up in the western Rwenzori region where rains aid cherry
ripening for the fly crop. On the other hand, these rains are delaying the flowering for the main crop. In the highlands the dry weather is delaying the flowering for the main crop. The activity in Mt. Elgon for premium parchment continues at a good pace. Natural Arabica (Drugar) is expected to be available by the end of February/beginning March. Uganda said it expects to receive near normal rainfall, with a slight tendency to above-normal, over most of the country in the March to May period, which constitutes the first major rainfall season for the year in Africa’s top coffee exporter. Some local exporters indicate that the production of this crop could reach around 6.0-6.2 mio. bags, of which exports would be 5.0-5.3 mio. bags.
Cameroon: Production rises to 25,315 metric tons from 20,270 tons in previous season, Trade Minister Luc-Magloire Mbarga Atangana says in emailed statement issued after official opening of new marketing season. Top 4 export destinations for Robusta beans were Belgium, France, Portugal and Italy.
India: Robusta New Crop 2018/19
Harvesting period Jan to March. 2019 Robusta Production is estimated at 250,177 mt. About 45% of the crop has been harvested but only 10-15% of that have been sold by farmers. Outputs are lower due to lack of sunlight during June to Sept; This is a problem and will affect differentials. Differentials for RC-AB continue to remain firm on the account of short covering, we need to remember that there was no carry over from previous crop. 12,686 mt. of natural Robusta were exported in Jan. 2019 compared to 9,763 mt. in Jan 2018, demand is very good.
Arabica New Crop 2018/19
Harvesting period is Dec. to Feb., 2019 Arabica Production is estimated at 80,939 mt., 95% of the crop have been harvested but only 40% of that have been sold by farmers. Reason being that farmers are expecting better prices and are not making any profit at current levels. Drying is delayed due to cold and cloudy weather, normally it takes abt. 5 days to dry, now it takes abt. 7 days. Outputs are lower due to insufficient sunlight during June to Sept. and lack of fertilizer application. 4,074 mt. of washed Arabica were exported in Jan. 2019 compared to 3047 mt. in Jan 2018, demand is strong. The Coffee Exporters Association of India has forecasted that the countries coffee exports for the year are about to fall, as a result of the damaging excessive monsoon rains that were experienced last year. This follows earlier reports from the Indian Coffee Board, which had reduced their new crop forecast by approximately 1 mio. bags or 15.81%, to now foresee a new crop of approximately 5,325,000 bags. This crop made up from an approximate 70.3 to 29.7% split between Robusta and Arabica coffees.
Indonesia: Some further heavy rains and winds are reported from the coffee growing areas. In some lower areas first pickings of the new crop has started, but quality is still bad and very wet.
PNG: There has been a steady fly crop flow of cherry and parchment from all highland regions, with the exception of Morobe province, where the old crop coffee declines while they await the new harvest.
Vietnam: Tet holidays are over, internal flow is slow, farmers are relatively relaxed with a healthy part of their crop sold. Meanwhile, weather was good and farmers had sufficient water supply for the trees in the Central Highlands. Some trees in the area have begun to blossom. Anyway, Vietnam’s provincial weather office said that rain in Vietnam’s Central Highlands will be lower than the historical average though the end of this month. A bumper harvest in 2017/18 saw export volumes rise by 20%, helping to offset weak prices. But that trick cannot be repeated this year. The 2018/19 harvest is worse than expected with total output dropping by up to 20% over last season. The Vietnam Cocoa and Coffee Association (Vicofa), which represents producers and exporters, attributed the low yields to unfavorable weather but also to farmers failing to adequately fertilize their crops. The Central Highlands, Vietnam’s major coffee-growing belt, forecasted to have less total rainfall than historical average from now through May, The National Center for Hydro-Meteorological Forecasting says on it’s website. Vietnam continues to replace old coffee tress. In the meantime, coffee polices aim to bring the total area under the crop down to 600,000 ha. in 2020. In areas where soil conditions are suitable, Arabica trees will replace Robustas. According to local sources, the Central Highlands region, the country’s largest coffee growing area, has replanted or grafted 108,800ha. of old plants so far, meeting nearly 91% of its target of 120,000 ha. by next year. The Lam Dong Province accounts for 54,000 ha., the largest area in the region. Coffee production in Dak Lak, Vietnam’s biggest coffee-growing province, is seen falling to 410,000 mt. in 2018/19 from 420,000 mt. in 2017/18, according to the chief of the Buon Ma Thuot Coffee Association.
China: As Chinese New Year is approaching, farmers have sold most of their harvested volumes to cover their expenses and all activities have come to a halt. Internal prices remain expensive as not much coffee is available locally. Irrespective of the market drop, local prices remain expensive on the back of decreased volume availability internally. Harvesting is nearly completed and some farmers estimate the total production to be around 40 to 50% lower compared to last year’s harvest.
Various: Nescafé, inspired by the coffeehouse experience, is reimagining ready-to-drink beverages with its Nescafé Coffee Protein Smoothie and Nescafé Cold Whipped Latte. Nescafé Coffee Protein Smoothie is a plant-based coffee protein smoothie made with 100% Colombian Arabica coffee, oats and almond butter. With 15g of protein, each 11 oz. single-serve bottle contains as much as one cup of coffee and is available in Banana or Mocha flavors for a suggested retail price of $3.49. Nescafé Cold Whipped Latte is unlike other ready-to-drink coffee products on the market. Just shake to unlock layers of true froth and foam to deliver latte texture you expect from a coffee-shop experience. This chilled blend is available in Coffee or French Vanilla flavors for a suggested retail price of $2.49. Nestlé has inaugurated a new coffee factory in Egypt for its Bonjorno brand, following an investment of EGP 250 mio. ($14 mio.). Located in the 6th. Of October industrial zone, the 12,740-square metre facility is said to have “the most advanced coffee making technologies”, according to Nestlé. It has eight production lines with a capacity of 14,000 mt. and potential to reach between 22,000 and 44,000 tmt. in the future. The Bonjorno brand was bought by Nestlé in 2017 as part of the acquisition of its parent company Caravan Marketing Company. The volume of world coffee exports reached a new all-time high of 124.46 mio. bags in calendar year 2018, according to ICO’s monthly statistics. This is a 5.7% increase over the previous year. Arabica shipments rose to 78.63 mio. bags compared to 75.38 mio. bags last year, or a 4.3% increase; whereas Robusta exports amounted to 45.83 mio. bags, up 8.1% from 42.39 mio. bags in 2017. Nestlé announced the launch of a new range of coffee products under the Starbucks brand to be available globally. The new range consists of 24 products, including whole bean and roast and ground, as well as the first-ever Starbucks capsules developed using Nespresso and Nescafé Dolce Gusto proprietary coffee and system technologies. This is the first product launch since the two companies formally joined forces in August last year and created a global coffee alliance. JAB Holding Co is planning two initial public offerings of its coffee and restaurant businesses, Germany's Lebensmittel Zeitung reported. "We want to bring both companies to the stock exchange separately in the next two to three years," JAB chairman Peter Harf told the trade journal in an exclusive interview. A JAB spokesman was not immediately available to comment. The newspaper said the IPOs would generate billions for the Reimanns, who have built a coffee empire over the past five years, seeking to take on market leader Nestle NESN.S by buying packaged brands like JDE and coffee house chains like Peet's Coffee. Lebensmittel Zeitung said the coffee business, also including Keurig Dr Pepper, had annual sales of $19 billion, while the restaurant business including the Pret-a-Manger sandwich chain and Panera Bread had turnover of $5.7 bio. The Massimo Zanetti Beverage Group subsidiary Massimo Zanetti Beverage Iberia has completed its acquisition of Portuguese food service company Cafés Nandi. The group says Cafés Nandi’s production site will enable it to double the current production capacity of its Portuguese plant. Massimo Zanetti Beverage Iberia says the acquisition of Cafés Nandi, which operates in the food service segment under the Nandi brand, will increase its number of clients in this channel. The US continues to lead global coffee shop innovation across quality and product development, with Allegra World Coffee Portal recording healthy annual outlet growth of 3.8% in a fiercely competitive market. An influx of international investment is pushing once niche artisan principles into the mainstream across the US coffee sector, with premiumization a key marketing strategy to sustain growth. Allegra valued the US market at $45.4 bio. Allegra anticipates a burgeoning 5th. wave sector will continue to shape the premium market, propelled by growing consumer sophistication and investment from large multinationals. Despite flattening comparable sales growth among leading branded chains, nearly 60% of US consumers surveyed by Allegra visited a branded coffee shop chain at least once a month 2018. This indicates there is still plenty of opportunity for operators who can enhance their value to customers in this competitive market. South Korea's imports of coffee declined last year for the first time since 2012, suggesting that the boom of coffee shops might have peaked. Market watchers said that the decline in coffee imports is a sign that the domestic market has become saturated, with big companies, such as Starbucks and Dongsuh Foods continuing to grow, while small coffee shops are suffering from weaker sales and tougher competition. Food company Kraft Heinz Co. has hired investment bank Credit Suisse to review options for its Maxwell House coffee business, including a potential sale, CNBC reported. The coffee business has about $400 mio. in earnings before interest, taxes, depreciation and amortization and could attract a price of at least $3 bio. in a sale, the sources, who were not identified, told CNBC. The sale of the coffee business will be one in a string of divestitures for Kraft Heinz, the sources told CNBC. Kraft Heinz spokesman Michael Mullen declined to comment on the CNBC report but said the company was focused on building its business around brands in growing and profitable categories where it feels it has a competitive advantage. "We will explore asset sales according to this framework and will engage if this alternative is superior to us keeping the business and helps to improve the company's growth and margin trajectory,” he said in an email to Reuters.
Sources: Volcafe, Flavour, ICONA, Taylor Winch (KEN)
Carlo Delfs im Interview für den Lyreco Pausenmanager 3/2016: