June 2018

Green Coffee Quality Report

Review and Expectations




Brazil: The winter started with the same weather pattern than the last weeks of autumn. Mostly dry all over the Southeast with mild temperatures and clear skys. Safras & Mercados reported that Brazil’s 2018/19 coffee harvest is 38% complete as of June 26th, compared to 44% at the same time last year and well below the 46% average for the past five years. Not all of the coffee is in the market yet, as it’s are still in the drying and cleaning process. Quality is good and the bean size is as good as expected. Only 1.7 mio bags were effectively shipped in May. Exporters guess that more than 1 mio. bags were left behind due to the 11 day´s lasting truck driver´s strike between May 19 and 30th. Usually coffee shipments intensify during the last 10 days of the month therefore exporters estimate that more than 1 million bags were left behind. The effects of the strike are still affecting the flow of the coffee shipments as long as shipping lines have limited space to load all ex-May shipments together with the June shipments. This situation shall continue in July. Government officials, transport companies and trucker unions are still under negotiations about inland freight prices and minimum freight prices amongst other items. This are difficult and complex discussions. The possibility of a new shutdown cannot entirely be neglected. Losses to farmers alone so far because of the strike are estimated at 6.6 bio. Reais (US$1.76 bio.), the country’s CNA farm lobby said, adding that it could take farmers six months to a year to recover from the impact of the protest. Disruption to the supply of animal feed has had a devastating impact on livestock. Some 70 mio. chicken had to be slaughtered because producers had no food for them, the poultry and pork processing association ABPA reported.

Only a few people are paying attention, but weather has been detrimental for the 19/20 cycle. Dry weather has been very good for this year quality but very bad for next year quantity. A pronounced off-cycle is expected for Arabica looking at the retrospect of rains during the crucial period of formation which takes place from April onwards. Basically, no rains have fallen since April and normally June through September is dry by nature, plantations will be facing a 6 months drought with soil already in water deficit and tired trees carrying a huge load this season. For this winter we will still need at least two slightly more intense cold waves that should occur in mid-July and another in early August. Group 2: Same behavior of previous weeks with virtually no offers, no sellers. Exporters complain that replacement continues to be very difficult, too tight market. Producers are neither selling nor accepting even scale up price bids. New crop Rio MInas are not availble yet. Some punctual and small business of for Zona da Mata new crop was reported trading for late July delivery but producers are avoiding to anticipate sales as qualities so far harvested have a Group 1 soft cup quality profile instead of Rios. Conilon: The flow of new crop coffees has increased and about 50% of the crop has been already harvested.


Colombia: The flow of coffee has improved mainly from the southern part of the country. The weather conditions have been reported above normal for this time of the year. The second round of presidential elections took place this month. Ivan Duque won, good news for the economy of the country. He will start his 4 year presidential period on the 7th. of August. The Colombian Coffee Growers Federation (FNC) and the United States Agency for International Development (USAID) joined efforts to promote the marketing of specialty coffee, investment in production and transport infrastructure (tertiary roads) and strengthening of producer associations to improve conditions of targeted coffee growers and help advance peace.This new joint work was formalized by signing a Memorandum of Understanding (MOU) between the FNC and Fintrac Colombia, the implementing partner in the country of the USAID Producers to Market Alliance (PMA), a five year program that seeks to increase competitiveness of rural producers so they can respond to new, growing market opportunities. Colombia produced 1.18 mio. 60 kg bags of washed Arabica coffee in May, up 32% from the same month a year earlier, the National Coffee Growers 'Federation said. The federations aid the increase was due to delayed flowering on some trees that had been expected to produce in previous months. Colombia will spend 39 bio. Pesos ($13.5 mio.) on coffee tree replacements this year, the government has said, after the federation called repeatedly for aid for farmers amid lower prices and the adverse effects of a stronger Peso.


Costa Rica: Remaining current crop coffees are being liquidated into the spot market and the next crop is still too far away for any sound business. Severe rains have been constant for the last month causing major landslides, flooding as well as infrastructure damages.  ICAFE report their crop estimate at 1.39 mio. bags, a reduction of 9% versus the current crop. 


Honduras: The shipment situation got worse again and the backlog is not getting smaller. New crop development is so far good. Some roya outbreaks reported, thus pest control is of utmost importance. Low grade season is starting. 


El Salvador: Many farmers in El Salvador have turned to specialty coffee trees identified by fanciful names such as bourbon, geisha and pacamaras in hopes of reviving a local industry devastated by crop disease just a few years ago.The trees produce some of the world’s highest qualitycoffee beans with distinctive tastes prized by consumers in the United States and else where who are willing to pay up for top coffee. Specialty coffee can earn farmers more than twice what they make selling standard varieties. The result is that El Salvador, though a small producer by size, has one of the world’s most diverse coffee crops.


Nicaragua: In Nicaragua, the political unrest continues. COSEP (Nicaraguan Private Sector Council) just announced a new national strike to start. This measure is trying to pressure the Ortega Sandinist Government to return to the dialogue table and accept to discuss the list of proposals delivered by the Episcopal Conference in order to advance new elections monitored by international organizations. There are thousands of containers and trailers that are stopped or moving slowly in the whole nicaraguan territory due to road barriers. The issuing of export documents, samples and exports is taking ages and moving very slowly for more efforts taken by Nicaraguan exporters.


Guatemala: Strong rains have been reported in the coffee growing areas as well as more roya outbreaks. The flow of coffee has slowed down. The Volcan del Fuego made the strongest eruption in the past 40 years. Lamentably over 100 people are reported to have lost their life. Coffee is mainly logistically affected, the direct loss is estimated 30.000 bags by Anacafe. The counting of crop damage has just begun and, according to the National Coffee Association (Anacafé), the ash reached about 125,000 hectares cultivated with coffee nationwide. 


Peru: The harvest in the centre region has reached 60% and in the north around 35%. Several regions are facing post harvest issues due to the lack of labour availability. Scattered showers around Cajamarca. 


Kenya: Cold wet weather over the last 3 months has introduced some CBD and some losses are to be expected. Harvesting has slowed down also as berries on the tree delay ripening and the lack of sunshine has hampered the drying of parchment. First auction is scheduled for 10th July with some small quantities of late crop leftovers, with no fresh early crop at this stage The port situation is improving slowly though there is still some congestion with cargo missing allocated vessels. 


Ethiopia: Fairly quiet internal market as the price of naturals at ECX is still very high and demand for washed qualities is not there. External market activities non-existent as demand is weak and buyers are focused on ensuring shippers to get coffee out in time. Rising temperatures and worsening drought linked to climate change are now hitting production that may require moving many ethiopian coffee fields up hill, experts say. Coffee-growing areas in eastern Ethiopia have seen the average temperature climb 1.3 degrees Celsius over the past three decades. As a result, thousands of hectares of coffee plants are being lost each year in traditional growing areas, which is raising fears about the future of Ethiopias coffee production. The country’s government is now encouraging farmers to grow coffee at higher elevations, about 1,000 meters above the norm.


Tanzania: The peak harvest continues in the Mbeya region with reports that drying conditions remain very good. Harvest in Mbinga is underway with reports of a bumper crop. Higher altitudes in the north have also started their fly picking. According to FAS/DarEsSalaam, Tanzania’s coffee production is expected to increase from1.15 mio. bags in MY 2017/18 to 1.30 mio. bags in MY 2018/19 due to biennial bearing cycle and favorable weather conditions reported by Tanzania Meteorological Authority (TMA).



Arabica:  The remaining of the fly crop in Mt. Elgon is being sold, mostly to middlemen. The main crop looks healthy and we expect harvest to start by the end of July in the low areas. Bits and pieces of Drugar are being traded at very proud prices in the Rwenzori area. 

Robusta:  Over half of the western crop has now been harvested. With London sliding lower internal differentials have firmed up. Weaker UGX has offset the impact partially. Quality improved strongly on the back of drier weather. 



India: According to the Indian Meteorological Department, south-west monsoon is progressing well. Most of the coffee regions experiencing normal to above normal rainfall. Heavy rain in all major Robusta growing regions, landslides and floods were reported in many places. Off-season, the local industry is covering shorts pushing up internal prices. Farmers hold off selling the balance of the crop awaiting a further increase in prices. With 7 months to go until new crop comes in, the current availability is getting scarce. Industry seems to be well covered for the 2nd half of the year. Coffee exportis are likely to fall 10-15% this year, as production has been hit due to dry weather in growing regions of Karnataka. Karnataka accounts for 60% of total production in the country. 


Indonesia: Towards June the highlands should have started harvesting, but so far, rains have slowed this start. The festivities in the middle of June (end of Ramadan) will interrupt the harvest again and expectations are that less coffee will arrive in Lampung compared with May. 


PNG: Cherry arrivals into the mills are slowing in the Western Highlands. The peak period in Hagen is over while expected to slow in Jiwaka in the next month. 


Vietnam: Increasing shower activity in the key coffee growing areas of central Vietnam will favor the trees and improve conditions for the next flowering of this crop. The forecast for MY 2018/19 production is about 29.9 mio. bags, a 2 % increase compared to MY 2017/18, due to favorable weather during the flowering stage. Vietnamese roasters including LaViet Coffee, TheWorkshop, and Bosgaurus Coffee share a mutual vision of bringing Vietnamese Arabica’s overall quality up to specialty standards through experimenting with yeast fermentation. Yeasts are hydrated and injected into fermentation tanks along with coffee seeds for different durations, between 22 and 72 hours. Coffee from one recentbatch of 72 hour yeast processed Catimor dazzled with a bright and fruity acidity equal to kenyan coffees, the mouth feel was juicy and the after taste sweet.


Various: Nestlé will be out sourcing the IT jobs to Spain, according to a press release published on the company’s website. Nestlé’s coffee unit, Nespresso, is also moving swiss jobs to Spain and Portugal. This move will impact an additional 80 employees, although the people affected by this reorganization will be offered jobs in the new locations. The company also intends to create a center of excellence for boutique operations in Italy.The cuts will be implemented over the next 18months. Starbucks Corporation announced that Howard Schultz is stepping down as executive chairman and member of the board of directors and will be honored with the title of chairman emeritus effective June 26,2018. During his four decades as CEO and chairman, Schultz grew Starbucks from 11 stores to more than 28,000 stores in 77 countries, while demonstrating that a business can simultaneously deliver best-in-class financial performance and share success with it’s people and the communities it serves. The USDA estimates a world surplus of 8 mio. bags of coffee in 2018/2019, considering production of 171.2 mio. bags and consumption of 163.2mio.The balance, disclosed by entity, is in linewith most market participants.


Sources: Volcafe, Flavour, ICONA. Taylor Winch




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