Green Coffee Quality Report
Review and Expectations
Brazil: The April rain average is usually much less or near half of the summer months. However April started with good amounts of rain. The rains were above average in Cerrado, North and South of Espirito Santo and Zona da Mata. Bahia got normal rains as well. All other areas got drier weather. Some isolated rains came from the sea and have reached the Conilon areas of Espirito Santo and South of Bahia. At the end of the month it has been dry over the most Arabica areas of the Southeast. May looks to be starting point to out dry across most of the growing regions. Although there are already places where producers are picking coffee cherries, there is no flow of coffee beans seen yet. Arabicas shall be in a full harvesting swing only by beginning of July onwards. Safras & Mercados (consultant and crop surveyors) estimate the 2018/19 coffee crop at 60.5 mio. bags versus 50.6 mio. bags on 17/18 crop. They state that Arabica trees should produce near 45 mio. bags and 15.7 mio. bags of Conilons. Ex-President Lula is on jail since April 7th for 12 years. However Supreme Court is going to vote whether the law should be changed to enable additional appeals. He might not stay for long time in jail (his defense is playing hard to obtain a habeas corpus) but he remains forbidden to run to the Presidential election in October.
Group 2: Very tight market with many exporters complaining about the lack of offers no matter what level of prices. Availabilities are at very end while new crop should not come to the market before July. Some premature new crop coffees were seen in Manuhaçu (Zona da Mata) but there is still too high leakage, too green with fresh and soft cup taste therefore non exportable quality. Conilon: Some reports of harvesting activities in Conilons areas of Rondonia, north of Espirito Santo and South of Bahia, but no flow of coffee seen yet. Indeed Conilon is expected to start the real harvesting after 20th of May.
Colombia: In Colombia, due to poor flowering at the end of last year, the next crop (beginning April) is expected to be down 20-30% from last year. Some exporters expect that the 2018 crop production will be around 13 mio. bags, a reduction of just over 1 million. 2015/16 and 2016/17 were big crops and trees are still recovering. Exporters expect supply to be tight and prices to remain firm until April/May. The midcrop flow from central region (Antioquia, Caldas, North Tolima) is expected to begin in April, and May and June in the south (Cauca, Nariño, Huila, south Tolima). The situation in the southern zone of production in Colombia continues with rainy conditions that may delay the entry of the Mitaca somewhat. In terms of quality and production, there must be a very large difference between the southern zone and the traditional Triángulo Cafetero, where a significant decrease in productivity should be appreciated this year due to an erratic flowering at the beginning of the season. Internal prices have declined 11% since December and coffee growers start to threaten with a strike coming up. The peso devaluated just on time with the first flow of the fly crop in Nariño, Cauca Huila and Cundinamarca.
Costa Rica: Producers are reluctant sellers and first want to see the first round of flowering. Alerts of roya-outbreaks do not give much confidence of selling neither. Field experts are busy assessing the situation. ICAFE estimates the current crop at 1.5 mio. bags. 80% of the crop has been sold and 45% is shipped. Business overall quiet. Weather rather erratic, strong rains with some sun.
Honduras: The 17/18 crop is about 95% completed, only about 5% are left to be harvest in high altitude regions (>1300 masl). Producers are already starting to prepare themselves for the next crop. The focus is clearly on shipping the current coffee. Overall exports remain still strong. The flowering for the next crop has been good. The low NY levels are impacting producers’ cash flows, proper farm maintenance is seen at risk. The congress is about to vote on propositions to reduce amount paid to IHCAFE for exports. 13% increase in exports vs. 16/17 crop (3.19 mio. 60 kg bags vs 2.83 mio.). Main destinations have been Germany (30%), Belgium (23%), and USA (13%).
Nicaragua: The 17/18 crop practically all harvested, 20% reduction vs. 16/17. The 18/19 crop is already beginning to show first flowering on trees. The weather continues to be the biggest risk factor for producers, rain and low temperatures in unexpected months are causing a larger presence of diseases in plantations. Low NY levels impacting farmers as they do not have the cash flow to properly care for the farms, many producers pruning trees ahead of the 18/19 crop. Producers having trouble paying their 1718 crop debts. Financial institutions are pressuring them, forcing some producers to sell their farms. In addition to that, since the 18th. of April, Nicaragua is facing political unrest due to measures taken by the Government to change the social security overhaul, increasing social security contributions by 5% with immediate effect and with the consent from the National Assembly. This and other measures intended to fund the Social Security Fund which savings seems to have vanished without much explanations. This provoked that college students start protesting against this social security overhaul and uprooting has not stop since then. President Daniel Ortega announced on Sunday that he was reversing the social security overhaul however this fact has not stopped the protests.
Guatemala: The harvest is now over and the flow of coffee is slowing down. 90% is already sold. The season will end with 3.3 mio. 60 kg bags, 10% less in production. What’s left to sell is in the hands of intermediaries. The good flow should continue until end of April. A good round of flowering has been reported, weather conditions are normal. The current price environment is not encouraging for producers to put full inputs into next crop.
Peru: Harvest is continuing at a slow pace, only 8% is harvested in the low altitude regions. Prices for the low quantity of low quality are expensive. Plenty of Colombian interest in low grades. Demand is building up for the better mainstream coffees. Intensified precipitation is impacting the timing of harvest. Exporters expect to see good flow not before the last week of April. They are estimating a 10% increase in production vs. previous year (4.4 mio. 60kg bags vs 4.0 mio.). Exporters do not expect to see a spaced out crop as last year, this crop should be concentrated enough for producers to only need two rounds of pickings.
Kenya: The outlook for the new crop July onwards is positive in terms of quality and quantity, especially compared to last year’s drought affected early crop. Millers and marketing Agents inform that by the end of April the marketing of the crop will be all but over, with minimal quantities to be expected in May. Dry mills are scraping together the last millings and the general impression one gets is that there will be a couple more sales before the auction break in May, as anticipated. The new electronic auction system is finally being installed and will be tested and used in the coming auction - the current redundant technology will finally be consigned to the museum and the expectations are simply for a faster auction. Port activities have slowed down and congestion occurs, largely thanks to the government promotion of transportation of containers by the new railway which is currently packing operational and management capacity. Availability of suitable food grade containers in Nairobi becomes more difficult with certain shipping lines. Rains continue and are expected to last through May and into early June.
Ethiopia: Abiy Amhed was named new prime minister after the previous prime minister resigned due to anti-government protests in Oromi and Amhara Regions. His nomination is seen as positive news for peace as he is from the largest ethnic group, the Oromio, who have been marginalized politically and economically for decades.
Tanzania: The last auction of the current crop will take place on May 3rd.The coffee available for this auction will mostly be undergrades and a small amount of main grades which are mostly coming from the northern regions of Kilimanjaro and Karatu. The outlook for the new crop remains positive and exporters expect some of the lower altitude regions to start picking in the coming weeks. The crop development continues to be positive and expectations remain optimistic.
Arabica: Mount Elgon is quiet and wet. The fly crop will be reasonably good. While the fly crop in the Rwenzori is coming to an end, Erussi is preparing for the new crop. There are little bits of fresh coffee offered from the numerous fly crops, but nothing chunky until Sep/Oct. when main crop will kick in. Robusta: New crop has not yet kicked in but is looking good. Rainy weather across all areas is beneficial but is slowing things down. Internal prices remain firm on the back of the lower than anticipated central crop. The upcoming western crop will result in fresh supply again.
India: The most coffee regions continue to receive pre-monsoon rains, this will help 2018/19 crop flowering and fruit set. Besides that it will take away the irrigation pressure and help to replenish water levels.. Overall coffee supply reduces slowly with farmers releasing the coffee hand-to-mouth.
Indonesia: The harvest started in the low lands and the flow of coffee is increasing to Lampung, but not enough yet to bring nearby local prices down. The quality of the coffee is still poor. Farmers are usually in a hurry to sell before Ramadan which normally leads to lower local prices but as the start of Ramadan is on 15th. of May this will be too early for many farmers and no pressure is expected. The local Industry dominates the market as they are buying to replenish their stocks being able to pay better prices than exporters
PNG: Exporters see increasing activities in the internal market with cherries changing hands in all highland regions. Cherry arrivals and quality into the wet mills continue to be good. Prices internally unchanged and high. The weather has remained wet making access to remote areas difficult.
Vietnam: Farmers are expected having sold 65- 70% of the crop now.
Various: Nestlé confirmed its target to grow organic sales by 2-4% this year and improve its trading operating margin. It also said it was on track to return to mid-single-digit organic sales growth by 2020. Meanwhile, organic sales growth accelerated to 2.8 % in the first quarter of 2018, up from 1.9% in the final quarter of 2017, helped by improving volumes. The maker of Nespresso and Nescafé also confirmed it expected restructuring costs of around 700 mi. swiss francs ($723 mio.) this year. Starbucks aims to open more than 5,000 stores in China by 2021 and will continue to drive market-leading and locally relevant innovation in coffee, store design and digital engagement to meet the lifestyle aspirations of its chinese customers while contributing positively to the communities it serves. Atlantic Coffee Solutions is going out of business and shuttering the former Maxwell House factory, one of the largest coffee manufacturing plants in the world. The Houston-based company will cease roasting and packaging regular, decaf and instant coffee at its massive factory east of downtown this summer, according to company officials. Atlantic Coffee Solutions is currently wholly-owned by Texas-based Ecom Atlantic, an affiliate of Switzerland-based Ecom Agroindustrial. Nestlé has announced its ambition to make 100% of its packaging recyclable or re-usable by 2025. Indeed, its vision is that none of its packaging, including plastics, ends up in landfill or as litter. Nestlé believes that there is an urgent need to minimize the impact of packaging on the environment. Starbucks reported another quarter of tepid sales growth. Revenues were up 14% from the same period the year before to a record $6.03 bln., and net income came in at $660.1 mio., up 1.2%. The coffee giant grew just as much as analysts expected in the latest quarter. However, the company’s share slipped nearly 3 percent at the stock exchange. A sign investors were expecting more.
Sources: Volcafe, Flavour, ICONA. Taylor Winch, Mercon
Carlo Delfs im Interview für den Lyreco Pausenmanager 3/2016: