März 2017

Green Coffee Quality Report

Review and Expectations


Temperatures have fallen to below 20 degrees over all coffee areas, particularly at nights. The end of the summer and its volatile temperatures are good for coffee trees that need less stress now until the harvesting. The rains at the end of the month were not uniform and March so far had less rains than the average in almost all coffee areas. Zona da Mata and north of Espirito Santo got only a quarter of average rains so far this month. This is much worse for the north of Espirito Santo that had erratic rainy coverage during the whole season. In the South of Minas and north of Sao Paulo regions, the new crop will start to be collected in approximately 45 days, while in Zona da Mata region the harvesting has started already and the first samples exporters have seen are coming with a high percentage of bigger screen sizes, although it´s still early to extrapolate to the total of the crop. CONAB sold on the last coffee auction 133.300 bags out of 137000 bags of old crop quality. 3.300 bags were left behind because of rio cup quality. The average price reached BRL$443,40 a reasonable price for an old crop (2009/10) quality. After buyers take delivery of the 133.300 bags, CONAB´s stocks shall be virtually zero.   
Group 2: Very thin market with very little liquidity. Traditional Rio Minas producers from Zona da Mata and Espirito Santo mountains are carrying one of the lowest coffee stocks of last couple of years while commercial long holders are with inventories exhausted. Exporters are reporting huge difficulties to replace their latest commitments.
Conilon: Some independent coffee surveyors are/were visiting North of Espirito Santo region to double check the Conilon tree conditions after the hot summer. General tree condition in Espirito Santo has improved but not enough to increase the crop this year, but surely it will help 18/19 production.  Rondonia, the second Conilon producing state should produce this year more than 2 million bags according to local state agronomists. They expect a yield up to 23 bags per ha, a record for Rondonia. Indeed they have renovated coffee trees and faced almost ideal weather this season. Harvesting just starting there, which is usually 30/40 days ahead of Espirito Santo. The pace of the harvesting is still slow as rains are not helping Rondonia farmers to accelerate the picking activities. Some photos are already circulating showing a quite impressive production being harvested.

Strong rains in different regions of the country. Flow remains very low and aggressive
prices must be paid internally. Due to the heavy rains that have fallen over Colombia at the end of March, there has been a huge landslide affecting all the road traffic to Buenaventura port. The latest information taken from local sources shows that it will take about 3 weeks for the situation to be solved. In the meantime, very little traffic can reach Buenaventura using an alternative route via Cali that is open only for a few hours per day. The start of the crop seems to be at least 1 month away. Colombia needs to replace at least 90,000 hectares of coffee trees annually, approx. 10% of its crop to keep production above 14 million bags per year. The head of the coffee growers' federation said that Colombia produced 14.23 million bags last year, the highest in 23 years, despite El Nino droughtand a 45-day truckers strike. This year output could reach 14.5 million bags, growers' federation head Roberto Velez told reporters, but new trees and a productivity increase to 21 bags per hectare are necessary.

Costa Rica:
Recent unexpected rains caused undesired flowering in several regions. The most regions finished harvesting besides Tarrazu. Warm weather will last for one more month, at least.
ICAFE is still pessimistic regarding the current crop. Their expectations for the 16/17 crop are placed at 1.4 million bags, a 17% less than last year. The West Valley will see a 26% reduction while Tarrazú will see a fall of 25%.

There have been some reports from Nicaragua that contraband coffee from Honduras has been detected crossing the border into Nicaragua.
Last pickings done with producers preparing farms for fertilization. Coffee flow slowed down, with the remaining crop concentrated in the highest areas. Flowering has been reported from all parts of Honduras. For some areas it is considered early therefore a possible early crop 17/18 might be expected. Weather has been mixed and untypical for this time of the year with rains throughout the country which might be causing an early continuous flowering. Boring, that is how Honduran exporters were feeling these days. The market continues calm, after the very good rhythm of sales experienced in January and February. Honduras confirms its enormous harvest but also its problematic in terms of phenolic coffees. In the important producing region of El Paraiso there is plenty of coffee with this cup defect. The problem is caused by insufficient labor, which causes a single cut (harvest) of cherries. Central America traditionally had up to three cuts per crop. Other reasons are the drastic changes in climatology and the intervention of the intermediaries in the domestic market, they are  mixing everything they buy from wherever it comes.

Some exporters are closing / have closed their wet mills in the interior as the flow of cherries is decreasing. The crop is at about 80 to 85% harvested. The lack of rain in Huehuetenango is becoming a real concern. ANACAFE has reported a new forecast that the current crop will be between 12-15% lower than expected due to the climate.

Intense rainfall caused several landslides blocking main roads which are connecting the coffee producing areas. Producers continue to increase stocks with first pickings, mostly around San Martin and the Central regions. Weather is forecasted to be dry, which will benefit the pace of harvesting. The crop is expected to start flowing in larger quantities after the Semana Santa.

Prices continue to fall on specialty quality ECX natural/unwashed coffees. Yirgacheffe in particular appears to have a much greater ratio of natural to washed coffees this season, probably as a result of the damage to washing station infrastructure early in the harvest. Private estates and cooperatives continue to sell their crop, with some farms selling out or rapidly approaching this point. Others seem to be holding out hope for a sudden increase on the NY market and a corresponding bump to internal prices. Significant stocks of Jimma 5 and Sidamo 4 coffees are being offered heavily though pricing on a differential tends to vary by a surprising degree, implying exporters are taking positions rather than selling back to back. The major cooperative Unions continue to stand firm on their pricing even though most of them have substantial volumes of coffee yet to sell. They usually do not start softening their pricing until late April or May, after they’ve exported a decent amount of volume and have had the opportunity to think about the amount of coffee still in the interior. Logistics appear to be as slow/fast as they ever are. Suppliers are reporting shortage of jute bags, which is causing delays in transport of coffee from the interior into Addis. Currently, only 2 companies, G7 and New Wave (an Indian owned company base in Dire Dawa—south) manufacture these jute bags and are trying to address the shortage in the market.  There is additionally a lack of kraft paper in the country, making container stuffing in Addis a challenge.

Finally, rumors continue to circulate regarding major structural changes to the regulations governing the coffee trade.  Representatives of exporters and the local agents for several multinationals have been engaged with the new head of the Coffee and Tea Authority to table a major overhaul of coffee trading.  A meeting with the Prime Minister has been tentatively scheduled to happen within the next 2 weeks.  No decisions have been made yet, but several key areas of discussion include:
-    The ability of private suppliers to export directly, bypassing the ECX
-    Formalizing the outgrower/estate regulations
-    Reverting to a more differentiated grading systems
-    Allowing forward contracts of up to 12 months

Harvesting of the early crop will start in some areas during this month of April, picking up in May and June. Flowering for the late crop (October onwards harvest) has happened in parts and more is expected with these current rains.

The weather over the last week has brought relief to the North with good showers across the Kilimanjaro and Arusha region.

Arabica: Good rains reported in the Mt. Elgon area and as a result, some fly crop is already seen in the lower areas. Parchment received is still mainly from the main crop but the quality is holding pretty well. If the weather pattern continues, exporters will see better volumes of fly crop coffees in April/May. In Erussi the picking has come to an end. Overall it has been a good season in terms of volume as well as quality. In Rwenzori the volume is still small but quality is improving considerably due to the recent rains. Meanwhile in Kasese, the production area for the natural arabicas, the weather is not helping and the production of Drugar coffees, currently in high demand, will probably be smaller and of lower quality.
Robusta: The rainy season has started, precipitation is steady across the coffee areas providing solid support for the upcoming Western crop. Volume from the interior declining every day. Most middlemen prefer to grade their coffee as there is no volume pressure. It is time to tighten quality controls and buy only from reliable suppliers. Shortage of containers from shipping lines slowing things down.

Temperatures are on the rise, farmers look forward to rains to support the cherry bud
development. Rainfall reported in few coffee growing regions. Most part Robusta regions are waiting for the much needed blossom rains. Lower water availability is limiting the possibility of irrigation in most growing regions. Coffee flow has reduced upcountry due to the lower terminal market. Farmers show no selling pressure and wait for better prices to come in.
The India Agriculture of Ministry has announced the temporary suspension of agriculture imports from Vietnam into the country, including coffee, bamboo, black pepper, cinnamon, cassia and dragon fruit. The suspension was due to phytosanitary reasons, according to reports. In a letter issued by the Agriculture Ministry to the Vietnamese Ministry of Agriculture and Rural Development, the Indian government said that "in view of the repeated interception of quarantine pests, the NPPO India is constrained to suspend the entry" of the commodities. Finally at the end of the month, India reversed their decision to ban imports of Vietnamese coffee, bringing relief both to Vietnamese exporters and the Indian soluble industry. The decision was taken after the Vietnamese government lifted their restrictions on shipment of Indian commodities.

Weather has been bad at the end of March with rains and flooding all over Indonesia, something to watch. Early new crop harvesting started with some coffee coming from the low lands. Coffee areas are still wet for the time of the year, with the dry season forecasted to start in early May.

Coffee activity remains subdued. Cherry activity is improving slowly in the Western Highlands and Jiwaka provinces. Wet weather conditions have subsided marginally. The drier conditions have provided some relief to the numerous temporary highway closures. The very unpleasant coffee borer arrived in the highlands of PNG. The Coffee Board is alarmed and has to be fast to neutralize the impact with the famers. The coffee borer pest is moving very fast. Some provinces are already declared as restricted areas. Inspectors and police is going to be placed on 3 checkpoints to prevent movement of and unprocessed coffee out of the quarantine areas.

The coffee flow in the internal market is slow and thin due to a lower flat price well as the
overall smaller crop. Export differentials are firming up. Local reports indicate that the production of coffee in the Yunnan province is bound to increase exponentially in the next few years, having produced in 2016 50% more coffee than the previous year, reaching the 100 thousand tons.

Heavy rain that hit swamped Vietnam's 2016/2017 coffee harvest has increased the ratio of low-quality beans and defects, with one major exporter saying quality is at its worst in nine years. Unseasonal rain that fell from October till December last year in Vietnam's Central Highlands coffee belt delayed the 2016/2017 crop harvest, resulting in more black and broken beans. The rainy season normally ends in early October, the harvesting was completed in January as usual. These defects have made it more difficult for the world's top Robusta exporter to find buyers for the low-quality commodity this year. "The ratio of defects this year has risen by 50 percent from 2016," said Le Duc Huy, deputy general director of Simexco, a major export firm based in the Central Highlands province of Dak Lak. "The quality is the worst since 2008." Downpours cut Vietnam's 2007/2008 coffee output by 15 percent to 1.08 million tons. The harvest usually starts in late October and ends in January. Rain during the blossoming period reduces yields, while the wet weather disrupts the outdoor drying process, necessitating the use of electric dryers that turn the beans black and worsen the taste. The exportable volume is therefore lowered. Two traders at foreign firms in Ho Chi Minh City, Vietnam's largest coffee trading market, estimated that low-quality beans made up 10-20 percent of the country's output this year, which is projected to ease 8 percent from last year to 26.7 million bags, or 1.6 million tons, the U.S. Department of Agriculture has said. The growing conditions for the new crop appear excellent. Mild/warm weather in the highlands combined with excellent groundwater and reservoir levels and robust farm gate prices already achieved will allow for superior levels of crop husbandry going forward. Reports circulate that whilst the limited flowerings in January and February did not “take” well there was a heavy flowering in March that has soundly set.


JDE is pushing ahead on the purchase of Singapore based Super Group, after getting the green light from the Chinese and Philippines governments.
Canadian iconic coffee shop, Tim Horton´s, has arrived in Philippines, highlighting the increasing importance of coffee in the Asian country. Coffee consumption in the Philippines has been growing year by year, while production has been decreasing around 3% per year over the last decade. To cater for the increasing consumption, the Philippine government has just announced a roadmap to develop production in the country, currently at less than 40K tons, with target to produce more than 200 thousand tons by 2022.
Nestle is close to reaching a deal with Cuba on forming a new joint venture to build a $50 million to $60 million factory to produce coffee, biscuits and cooking products, company Vice President Laurent Freixe said during a visit in Havana.

Sources: Volcafe, Atte, Falcon, Flavour, ICONA, Taylor Winch


Herbst 2016

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

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