September 2018

Green Coffee Quality Report

Review and Expectations


Brazil: In most areas in Brazil the rains were seen at or above historical averages in September, no weather concerns are foreseen short-term for the next crop. The harvesting is virtually finished in most of the areas. According to producer sources there are hardly no cherries on the trees to be picked but patios and driers are fully engaged with the drying process. We should now be facing the peak of the availability this season even considering what has been already disappeared with already executed shipments. According to South of Minas sources and attested by photos and videos, a very promising flowering has occurred in most of the South of Minas areas. This flowering should have covered 60/70% of the coffee trees while the August one covered only 10%. There are more rains forecasted which will help the fixing of this main flowering. Another flowering should still occur later and if confirmed then trees should produce at their full potential. The Brazilian Agricultural Statistics Agency CONAB has revised the 2018/19 crop size upwards by 3.2%. This is their final assessment of the 2018/19 crop that states to be 59.87 mio. bags, made up from 45.9 mio. bags of Arabica and 13.97 mio. bags of Conilon.  CONAB figures are mostly in line with private estimates or even higher on Arabica´s figures. However their figures on Conilons seems a bit conservative against most estimates of 15 to 16 mio. bags. Their research is deeply detailed in all production aspects, planted areas etc. According to their figures, the whole area producing coffee reached 1.86 mio. hectars with an average yield of 32 bags per ha. Shipment logistics remain complicated with shipping lines either refusing new bookings or postponing the existing ones or even canceling others. Group 2: Very little quantities are available in South of Minas. The high cup quality standard this crop in the South of Minas are making Rio availabilities much lower than previous years. Even with the virtual end of the harvest, Rio qualities did not appear in any sizeable volume. Most of trading houses continue aside. Conilon: Harvest is over. Flowerings came in beautifully with high chances of good fixation. Rains were good and irrigation systems are working at full capacity. The feeling in Espirito Santo is that next year will be better than 18/19 given the correct weather conditions. The amount of new areas coming to full production next year is promising.

Colombia: The harvest is finally kicking in, so the flow should improve shortly. The Colombian government will place $34 mio. (100 bio. pesos) in a fund to help coffee farmers hurt by low international prices, The distribution scheme for the subsidy has been defined. Max 25000 Pesos (4 cts/lb) are distributed per Carga (125 kgs) if prices fall below 700,000 Pesos/Carga. The subsity will be valid till the end of the calendar year, or till the fund is used up! With the subsidy implementation now clear internal prices remain well above the intervention level (cost of production) and with the action on ICE. The strike in Buenaventura has ended, exporters expect logistics to return to normal. According to the National Federation of Coffee Growers, Colombian coffee production reached 1.3 mio. bags in August, or a 2.8% decrease over the same month last year. Year-to-date production (January-August) totaled 8.8 mio bags, down 2.2% on year.

Costa Rica: Cherry arrivals from the low lands are increasing and prices remain firm as producers are not forced to liquidate. Weather patterns are unstable. According to ICAFE, the number of coffee growers shrank by 19% between 2007 and 2017. Many factors are at play, some of which, ironically, are a direct result of Costa Rica’s successful economic and social development. The sons and daughters of coffee farmers who were successful in the
80s and 90s are now college-educated professionals with wide-open life prospects outside coffee. Back on the farms, well-enforced labor, environmental, and social security laws contribute to higher costs of production relative to Costa Rica’s regional peers. The rate of urbanization in the Central Valley, which includes the San Jose metropolitan area, has relegated coffee to the backyard gardens of suburban homes.

Honduras: Crop development is ok, but the flow is not expected to be as early as last year. More leaf rust incidences have been reported but it seems to be under control. The weather is cooler with overcast days coupled with occasional rains. Provisional export figures from IHCAFE for the 17/18 season report 7.291 mio. bags of 60 kgs. which equals  to a minus of1% compared to last year. Exports from Honduras are set to reach 9.5 mio. 60-kg bags in the coffee year ending September 2018, resulting in the same levels of exports recorded last year.

Guatemala: Weather conditions are normal. Coffee from the country’s lower lying regions has started to flow albeit at very low volume, yields are closely being monitored, but it’s  too early to draw any conclusion. Anacafe pegged the final production for 17/18 at 3.3 mio. bags of 60kgs.  The 2018/19 crop estimate is expecting a 10% increase due to biannual crop.

Peru: 15% of the crop remains to be harvested. The competition in the field is tough and is not inspiring much FOB business. Quality remains good. Warm temperatures in the north have been beneficial for coffee drying. The market is estimating a total outcome of 2018/19 crop to be down 10% to about 3.7 mio. bags.

Kenya: Late crop is still green on the trees, exporters expect the harvesting to start towards the end of September in the lower lying estates which also have the possibility to irrigate, and during late October and into November at the higher lying smallholdings. At the auction finally some more coffee from Meru on the eastern slopes of Mt. Kenya is feeding in which brings some better looking coffees to the market, much of the material on offer are now from secondary and tertiary parchment qualities. The weather is dry and hot with some imposing clouds at times but still too early for rain which is not expected much before the middle October. The country is expecting above-average rainfall during the season that runs between October and December, the meteorological department said. “The distribution of the rainfall in time and space is expected to be good over most places especially during the peak month of November.” Logistics continue smoothly from Nairobi to Mombasa and onward. The new train line has added additional capacity and the result is a huge improvement in service from the lows of May / June.

Ethiopia: This month of September has seen one of the lowest trading activity at the ECX in at least 7 years, with a total volume traded of around 4,700 tons. The average activity for a month of September has been 10,000 mt. since 2012, but the prices, the imports paralysis and the political uncertainty have pushed trading to a halt. Two thirds of the coffee traded was either Jimma or Bench Maji (lower-land, not-so-wonderful naturals that usually end in a Jimma/Lekempti blend), and the remaining was mainly Harare coffee. If the volumes do not pick up this month, we will find ourselves with a very important carry over. New crop is forecasted to be a very good one and exporters expect the harvest to start around mid/late October. The 2017/18 crop exports are expected to end with 3.9 mio. bags, a 7% increase versus the 3.65 mio. exported for 2016/17. Due to favorable weather conditions, the crop estimate for the 2018/19 crop has been raised to 6.5 mio. bags (from 5.9 mio. bags). The political situation in the country is on a rollercoaster, alternating moments of nationalistic euphoria with times of dark tribal unrest, with almost 30 people killed in and around Addis Ababa. Of course all of this has an effect on the coffee exports. Many exporters have closed their offices, while transport from the producing areas (not that much is being transported) has been stopped for a while.

Uganda: Volumes picked up a little in all areas, another 4 to 6 weeks to go till larger volumes will hit the market. Ugandan coffee exports fell 5.9% in first 11 months of season to 4.01 mio bags, from 4.26 mio bags a year earlier, according to the UCDA. Robusta accounted for 74% of shipments during the period. Exports in August fell 17% to 348,952 bags.

India: The coffee production in India will slump to the lowest in 21 years next season as heavy showers, flooding and landslides damaged trees in the main growing areas in the south of Asia’s third biggest producer. The Union government of India is currently assessing the losses suffered by coffee planters due to the heavy rainfall that battered plantations in Wayanad in Kerala and Kodagu in Karnataka. A first estimate by the Coffee Board of India pegs losses at around 82,000 tonnes. According to the Coffee Board, among the southern states of Karnataka, Kerala and Tamil Nadu, the crop loss is highest in Karnataka followed by Kerala and Tamil Nadu. Early estimates show that the loss could be higher for the Robusta crop, since the rainfall was more across plantation areas of this variety. In the meantime export shipments have catched up and transport returned to normal although some roads are still blocked. The crop needs another 2.5 months until harvesting can begin. New crop shipments started to trade at a significant discount versus current levels triggering industry demand.

Indonesia: August exports for Robusta from Panjang ended at 17.284 mt. This is equal to July 18. Compared with last year this is a reduction of 50%. One wonders were all the coffee is, as exports from Panjang since the start of the season (April) have never been so low this century. Total exports from Panjang until September 2018 are 98,414.82 mt. down 61.05% compared with previous year.

PNG: The crop seems to be coming to an end and local prices remain on the high side. Wet weather, lower NY Arabica and the beginning of the off-season are the main reasons.

Vietnam: Early pickings of the new crop appear at farmers drying yards. Heavy rains continue to fall and should slow down next month in front of the harvest. The bad/wet weather with heavy rains caused difficult travel further the moisture content is also increasing at the coffee warehouses. The temperature is about 22-29 degrees in Buon Ma Thuot while it is around 25-30 degrees in Ho Chi Minh City. Vietnamese exports during Jan-Sep were seen at 1.46 mio tonnes, up 19.6% y/y. In September alone the country exported 80,000 mt. of coffee. As requested by the Ministry of Agriculture and Rural Development, the Vietnamese coffee sector will maintain a stable coffee growing area of 600,000 hectares.

Various: Germany's Melitta opens coffee factory in Brazil's Minas Gerais. The new facility, built in Varginha municipality, is the companies fourth coffee plant in Brazil. The factory has a capacity to process 500,000 bags and will support the growth for sales of roasted coffee brands. The investment volume for the new plant is 40 mio. R$ ($9.6 million) and may generate sales of 200 mio. R$ in the next 4 years. Starbucks celebrates this month the opening of its first Italian location. Starbucks Reserve Roastery opening inside the historic Poste building in Piazza Cordusio is the company’s first location in Italy, with plans to bring additional cafés to Milan beginning late 2018. Designed as an homage to the Italian espresso culture that inspired Howard Schultz 35 years ago to create the Starbucks experience. The Coca-Cola Company has acquired the Costa coffee chain from its parent company Whitbread for £3.9 billion (approx. US$5.1 bio.). Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives Coca-Cola access to this market with a strong coffee platform. Dunkin Donuts plans to unveil 50 U.S. test stores this year that aim to make it easier for customers to grab coffee on the run with dedicated pickup areas, digital kiosks and expanded drive-through windows that prioritize orders via mobile app. The company will invest about $100 mio. in the effort. The United States Food and Drug Administration (FDA) has issued a statement in favor of a proposed regulation to exempt coffee from Proposition 65 cancer warnings. Under Proposition 65, California law requires that products contain cancer warnings if they will expose consumers to chemicals that California health authorities have identified as causing cancer. A partnership led by Illycaffè and Lavazza, together with Istituto di Genomica Applicata, IGA Technology Services, DNA  Analytica, and the universities of Trieste, Udine, Padova, and Verona, has released the results of the Coffea arabica Genome Sequencing Project. This unique achievement in genome research will accelerate scientific efforts to ensure the future of coffee agriculture, which is threatened by climate change.

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

Herbst 2016

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

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