September 2017

Green Coffee Quality Report

Review and Expectations


Brazil:  Below average rains between the end of the third-quarter and beginning of the fourth quarter of 2017 impacted some areas to curtail the potential of the trees, mostly in Minas Gerais – for both Cerrado and South of Minas. Temperatures above normal have also provoked a certain degree of defoliation, but it was not spread-out evenly, which will create differences on the forecasts that are being released. The amount of rains falling in the coffee-belt has been very generous ever since then, allowing not only the recovery of soil-moisture, but also refilling dams and reservoirs. And the rain kept falling over all coffee areas in February. Those rains combined with warm daylight temperatures are very beneficial for the final development of the cherries. Rains during February are so far more than the whole month average in the Espirito Santo (south-Arabicas and north-Conilons), Bahia. Zona da Mata is a bit behind. The still tight differential´s environment does not allow exporters to be aggressive even for new crop forward shipments. At this stage of the season, producers seem controlling the offers for both nearby shipments and new crop as well, forcing exporters to keep the conservative sale´s policy even new crop offers. Differentials are wider for the new crop but not as wide as potential buyers look for. Comexim has released their first 18/19 crop estimate showing a total 60.7 mio. bags or 23% more than the 49.4 mio. bags of the current crop. They estimate Arabica production to be as high as 45.15 mio. bags and Conilons at 15.55 mio. bags. Unicafe and Terra Forte have published their 1st. 2018/19 crop estimate. Unicafe estimate at 58.85 mio. bags with 43 mio. Arabica and 15.85 mio. Conilons while Terra Forte estimates it at 59.1 mio. bags distributed into 43.6 mio. Arabica and 15.5 mio. Conilons.
Group 2: Buyers from traditional markets like Turkey/Lebanon/Greece, etc.are postponing as much as possible new purchases, confident they may get lower prices as long as new crop comes closer. They do avoid new buying trying to replace with Robusta or any other cheap Arabica rather than pay current high flat prices of this crop.

Starting the end of the month, a new coffee renovation subsidy program will be launched. As per FNC, wet weather will cut coffee output in Colombia by 20% in the first half of 2018 compared to the same period previous year. Noting that rains in July, August and September 2017 had damaged the flowering of trees to be harvested in 2018.

Costa Rica:
The crop is well sold by now and 88% of the crop hasbeen harvested. Weather is normal for harvesting. Some coffee remains in farmer hands waiting for the right offers, although not a lot of volume. Close attention is paid to crop husbandry as weather turns supportive of pests.

Weather patterns have normalized with less rain and higher temperatures.
Demand is relatively quiet. Quality looks good so far and exports are running smoothly. International demand is healthy. Exporters are working at full throttle and focus rather on buying than selling. The first coffees from the highest areas start appearing on the market.
The 7.66 mio. bags produced in Honduras in the last harvest are due to higher productivity of the coffee plantations.

Some more activity in the internal market and flow of parchment is getting better, finally as well from Huehuetenango.  Colder-than-usual weather has been reported with rains in northern regions. Good coffee flow at current levels with pleasing quality.

Very first arrivals of parchment in the San Marin region look promising. Less than 5% have been harvested so far but rainy weather has slowed down the drying. Some broca cases were reported. Past crop lots are flowing gradually into the market. Initial harvesting is reported from the  lower altitude producing areas, albeit intermittent due to heavy rainfall.

The weather is dry and sunny, good for stressing the trees but rains are in need to
facilitate a nice flowering in the coming weeks. Threatening clouds in the morning simply evaporate - some rains upcountry have already provoked a flowering in some parts. The long rains generally start during March so whilst we are a bit early we can say that the dry spell since December has been quite intense and long enough! Customs have tightened up on their physical verification activities in the Nairobi Inland Container Depot (ICD = railhead leading into the Port of Mombasa), triggered by the failure of their automated scanner. This has resulted in a delay in stuffing and delivering containers but we seem to be over the worst of it now and starting to see some movement.

The authorities have now moved to fortnightly auctions due to the reduction of coffee available from the outgoing crop. The last auction in February had 15,000 bags on offer which was nearly exclusive private coffee buyers from Mbeya and Mbinga and then some cooperative coffees from the north. The weather in the south remains relatively wet with intermittent rainfall – some cases of CBD were reported. The north is hot and dry. The northern mills have stopped receiving coffee now and the end is in sight for the milling schedules. Exporters anticipate only a hand full of auctions left for this season.

Fierce activities at ECX for the top qualities, mainstream activities are rather lackluster. Still some volumes of old crop parchments traded too. In Ethiopia, there are serious problems at the port of Djibouti (the only way out for Ethiopian coffee), where the local authorities have seized the DP World owned terminal over disputes over the lease agreement between both parties. It’s certain that the move will affect the operations at the port, although both the Ethiopian and the Djiboutian government are giving assurances that disruptions will be minimal.

The Bugisu crop is almost over now, some parchment volume remains in the stores which farmers keep traditionally as a deposit. This will be released throughout February. The weather has been dry for two months now. In Rwenzori the Drugar is getting ready for the fly crop. Some bits and pieces of low qualities already moving around but it will pick up by early March. A nice flowering has been seen on Mount Elgon. Now the farmers need good rains to fix the next crop. In the Rwenzoris on the other hand exporters have seen some early fly crop changing hands. Farmers need to pay the school fees at this time of the year.
Robusta: The central harvest flow has ended. The small volume remaining is mainly graded and offered at very proud prices. Eyes are on the Western crop, which needs another 3 months till harvest.

Robusta farmers have completed most of the harvesting and start to shift focus to irrigating their farms as summer rains fell short in some of the coffee regions. The flow to the mills has picked up significantly and exporters aggressively cover their shorts. Labor shortage is the main reason that some regions are not finished yet. Many growing regions in Karnataka are reporting significant drop in their Robusta production, this coupled with relatively better price realization for Robusta Cherry have discouraged many producers from wet processing.

The flow of coffee has increased mainly because the Chinese New year was approaching. FOB activities are rather slow, mainly due to persistently low prices. Harvest is about 90% advanced.

Cherry purchase and wet mill activities continue to escalate in the Western Highlands.
Receipts in to the warehouses have improved slightly, mainly from the Western Highlands and Jiwaka Provinces. Eastern Highlands is still about four weeks away.

The fly crop from low land has started. Quality of the crop is considered poor and small. Local prices remain very firm and many industry players are looking abroad for coffee. Coffee output in Indonesia will probably drop to the lowest in seven years as wetter-than-usual weather rots beans in the world’s third-biggest grower of the robusta variety. Output may fall 17 percent to 500,000 metric tons, or 8.3 mio. bags, in the season starting April 1 compared to last year. That would be the smallest crop since 2011-12, according to data from the U.S. Department of Agriculture.

Harvest season is in full swing. Mills were focusing on collecting in their outstanding purchases before labourers depart for holidays on 14th. February for a 6-day long TET holiday. FOB market premiums for higher quality continue to be weak, enabling Vietnam to be competitive versus other Robusta origins. January 2018 exports hit a record 195,000mts, of which 18000 mt. were shipped to Indonesia.

Sources: Volcafe, Flavour, ICONA. Taylor Winch




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