March 2019

Green Coffee Quality Report

Review and Expectations


Brazil: March is coming to the end with a rain coverage above average in most of Arabica areas. Parana, Sao Paulo Mogiana, Cerrado of Minas and South of Minas, about 80% of the Arabica production area, rains were abundant this month. On the other hand, the Arabica areas of  Zona da Mata and South of Espirito Santo Arabica got 30% less rains than usual for this period. The Conilon areas between North of Espirito Santo and South of Bahia, had erratic rains, high temperatures and long sun exposure. Rain coverage was about 50% below the historical average for this month. Some photos of premature harvesting circulated the end of the month. In some low and hot areas, producers started the picking and drying in natural process.  Most of producers however shall start their picking during May. 175 mio. bags of coffee have been shipped the last 5 years between 2014 and 2018 and have generated US 26.8 bio. Dollars in this period. Despite the reducing income, coffee remains at the 5th place on Brazillian agro product exports. Former President Temer who left the Presidential Palace last December 31st, was arrested in Sao Paulo. He and other 10 persons have been accused on various corruption schemes involving nuclear plants and Port of Santos concessions among other issues. The total corruption scandal may have reached impressive 1.8 bio. Reais. Now two former presidents are in jail, Lula (2003-2009) and Temer (2016/2018).

Colombia: Crop prospects for the upcoming harvest remain good. The strike in Colombia is still on after 17 days and getting worse due to unfulfilled promises from government. The blockades on the Pan-American highway that connects three departments caused lack of food and fuel. Now more groups are being called to join the strike and currently trucks are allowed to pass thought a highway to the port only during 4 hours per day which probably will cause several delays in shipments.

Costa Rica: Finally, after farms and farmers have built up stress because the weather was too dry, the rain has finally arrived. ICAFE  has lowered its 18/19 crop estimate to 1.29 mio. bags (-15.7% y-o-y) of which 24% is yet to be sold.

Honduras: Weather was hot and dry. Picking season is ending. It has been observed that producers are picking coffee as is (green and red) to reduce cost. Producers are not  motivated motivated at current price levels and are not making proper investments in the farms for the coming crop. Exports remain almost 18% behind last coffee years. Exporters estimating close to a 10% decrease in production vs. last year which brings us to 6.5 mio. bags.

Nicaragua: Farmers are 95% advanced with the harvesting of Arabica and the Robusta harvest is officially over. Large local players have been aggressive with pricing although larger exporters have seen smaller exporters having trouble to financing in order to compete locally. Without any doubt there will be consolidation in market share in 18/19 among exporters. Current ICE levels have been devastating for the producers as they have worked below cost of  production for months now. Everything indicates that the next year will be lower in crop, a decrease of approx. 20% is expected. Not only because the plantations will be tired as 18/19 crop was larger than expected, but also much less investments into farming is being observed. Nicaragua especially will likely suffer the most in washed mild countries as there is no formal financing available to producers through banks any more. 

El Salvador: The government in El Salvador has announced their intent to sign a finance agreement with the Central American Bank for Economic Integration CABEI to raise a 86 mio. U.S. dollar loan to finance coffee farmers for a renovation program. Aged trees will be replaced with new, higher yielding and disease resistant varieties.

Guatemala: Producers are very disappointed about prevailing prices which might lead too less husbandry for next year. The harvesting is almost over.Many wet mills will start closing their operation for the harvest during next weeks, Before Easter holidays all coffees should have been milled. Temperatures have been high; however, some rains are expected in the very near future. Producers are not investing as required after harvest, this is a big concern for future crops.

Peru: Harvest moving very slowly, Rains have been intermittent, giving some breathing room for drying.

Kenya: Some mills are now chewing through undergrades and some catalogues start offering rapidly increasing volumes of lower grades. No rains yet, morning clouds show a promise of precipitation, but it remains dry and dusty. irrigation is prohibited in most rural areas which does not help the dry state of the coffee estates. Coffee trees look stressed with dropping leaves but very little spiking for now. Logistics continue smoothly with the new railway performing quite well in moving container cargo up and down to Mombasa. Shipping lines also keeping mostly to schedule.

Ethiopia: Very little amounts of parchment are changing hands at ECX. There is no significant adjustment of prices to the current market expectations and therefore, not much activity on the export market. Activity in the dry mills of Addis is picking up and exporters are busy preparing shipments for the upcoming months. Quality of arrivals for naturals, especially Lekemptis, is not impressive.

Tanzania: The season is now coming to an end with not more than 2 or 3 auctions left. The TCB made an official announcement allowing direct export and incentivizing the collaboration between exporters and cooperatives to improve quality and yields. In the south the crop has been largely affected by CBD and there has also been a lack of follow through rainfall after the first flowering. The port is still congested with an average of 2 weeks delay.

Uganda: Rains continue in both, Mt. Elgon and Rwenzoris. Drugar flow is picking up. Rains continue in the Robusta regions pushing the ripening for the next western crop for which exporters expect to see harvesting to start next month.  Volume in general is very limited due to the low terminal market.

India: Harvesting is finished and farmers have sold enough to wait for better prices now. The yield of the bigger screen sizes is lower as expected and prices for RC AA have disproportionately increased. Differentials are heading north as all the factors are favourable, strong currency, lower market, some exporters short and famers are not selling as it seems they have sold enough to settle the bank loans and harvesting expenses.

Indonesia: Crop looks to be good and differentials feel a little weaker May onwards. The rains prevent the drying of the early new crop coffee. Although the first new crop coffee arrives in Lampung, the quality is still very low (high moisture and triage). Ramadan starts early May this year, so there is a very short period to prepare and sell some coffee for the farmers if at all. Depending on the time of availability of the crop this can trigger higher local prices when shorts need to be covered.

PNG: Cherry prices have steadily increased with more mills beginning their operations.

Vietnam: Weather conditions continue favorable for the development of the coffee trees despite some concerns among the industry for lower rainfall and underground water levels. The hot and dry conditions in the Central Highlands are currently still under control. Farmers have irrigated 2 to 3 rounds and according to them water supplies are still sufficient to cover their irrigation needs. However, the water level in reservoirs/rivers seems to be lower than the same period last year causing some concern amongst farmers. Greater precipitation is needed to favor flowering and decrease the probability of aborted blooms. The Central Highlands, Vietnam’s coffee-growing region, is likely to get 20%-40% less rain in April than the historical average, National Center for Hydro-Meteorological Forecasting says on its website. Vietnam will process more than 25% of its total coffee beans by 2020 to increase the value and brand building for Vietnamese coffee products, according to the MARD Processing and Market Development Authority (AgroTrade). The country targets to raise the output of roasted coffee to 50.000 tons, and instant coffee to 255.000 tons each year.

Various: A number of supermarket chains in Beijing and Jiangsu province in China were found to be selling counterfeit Starbucks coffee after the country’s food and drug regulating agency began a crackdown recently. During its investigation, Beijing's Municipal Food and Drug Administration discovered "Starbucks VIA Instant packets" that carried anti-forgery tags issued by Guangzhou Baiyi Food Trade were not genuine products. Famous Chinese supermarket chains like Greenland, Direct Global Goods and Hualian Supermarket in Nanjing, and Carrefour in Beijing, were found to sell as well fake Starbucks coffee. Nescafé is the world’s third largest fast-moving consumer goods (FMCG) brand behind Coca-Cola and Pepsi, according to a Euromonitor International survey of the top 100 megabrands in the sector. The study, which ranked brands by their retail sales value in 2017, analyzed eight categories of products comprising packaged food, soft drinks, beauty, and personal care, consumer health, tissue and hygiene, home care, hot drinks, and pet care. The New York Market is trading at near to thirteen-year lows in value, but if one is to appropriate thirteen years of inflation in terms of costs of production, the income for Arabica coffee farmers in general is much worse than the dip in value would indicate. Even for the few countries that can take some advantage from weakening domestic currency, to counter the low reference prices of the terminal market. Gold was Uganda’s biggest source of export revenue in the six months through January, beating coffee, the country’s traditional top earner. The East African nation shipped $357.1 mio. of the precious metal in the period, compared with $213.4 mio. of coffee exports, the Finance Ministry said on its website, citing data from the central bank. As per UCDA figures, Feb coffee exports dropped by over 33% for Arabica grades and over 11% for Robustas, compared to last year’s figures. This is a decrease of 16,68% in total with an export volume of 323.828 bags. Reasons for this decrease are not too hard to be imagined, with a further weakening terminal market and a large gap between seller´s and buyer´s price ideas. FAQ prices remain firm with small volumes traded only. Despite the difficult situation a program for planting fresh seedlings is further followed. During the first 11 months of 2018, Vietnam supplied 25% of Japan's imported coffee products, compared with 27% from Brazil, which saw its Japanese exports fall 7% year on year over the same period. According to Toyohide Nishino, executive director of the All Japan Coffee Fair Trade Association, consumer thirst for good tasting, low-priced coffee is driving Robusta's market share. Japan imported 88,000 tons of unroasted coffee beans from Vietnam in all of 2017, a tenfold jump from a decade before, and surged 15% year on year to 94,000 tons in the 2018 January-November period alone. Kenya aims to increase domestic consumption to as much as 30% of output by 2022, from 5% currently, Agriculture Ministry Chief Administrative Officer Andrew Tuimur says in Nairobi. Canada's iconic coffee and doughnut chain Tim Hortons has made headlines with the recent opening of its first restaurant in China, the world's fastest growing coffee market. The new restaurant, which opened on February 26 in central Shanghai, marks the first step of the company's new initiative to launch more than 1,500 "Timmies" in China over the next ten years. Tata Coffee Vietnam Company Limited, a 100% subsidiary of Tata Coffee, unveiled their state-of-the art freeze-dried coffee production plant Vietnam, at a grand ceremony, on March 6th 2019. Situated at the Binh Duong province of Vietnam, it denotes a very significant first for Tata Coffee. This is the Company’s third manufacturing plant, after Theni and Toopran in India and is the first one to be set up at an off-shore location. Along with the Vietnam Singapore Industrial Park (VSIP), Tata Coffee Vietnam Company Limited hosted the ceremony at VSIP II Binh Duong. This 5000 MTPA plant has started its manufacturing operations within 19 months from its Ground-Breaking Ceremony (16th August 2017) as committed. The Factory has had an exemplary safety record completing almost a million-man hours construction and commissioning work with zero harm.  The site is certified for LEED (Leadership in Energy and Environmental Design) and is expecting BRC (British Retail Consortium) shortly. According to the UK Coffee Report, created by Allegra World Coffee, 6,517 new coffee shops are expected to crop up nationwide by 2023, which could lead to a shortage of baristas. There are currently 160,000 baristas working in the UK, but the research claims that 40,000 more will be needed to accommodate the looming surge of coffee shops. Given that the industry relies heavily on overseas workers, the report suggests that Brexit could have an adverse effect. Nestlé announced that it would disclose the list of suppliers alongside a variety of data of its 15 priority commodities, the first disclosure of its kind in the industry. This will accelerate the company's journey to reach full supply chain transparency. These commodities cover 95% of the company’s annual sourcing of raw materials.

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


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