July 29, 2013
Brazil’s coffee roasters get a taste for arabica
By Emiko Terazono
For Brazilian coffee drinkers, their morning cafezinho may be tasting a bit smoother these days.
With the fall in the price of the high quality bean arabica relative to its lower quality counterpart robusta, the South American country’s coffee roasters are increasing the amount of arabica in their blends for the first time in a decade, say industry executives. The percentage of robusta in the average Brazilian blend has been rising steadily, from about 20 per cent a decade ago to the current 50 per cent.
But this year’s bumper arabica crop in Brazil “has stopped a 10-year trend”, says Carlos Brando, director of P&A International, the marketing and consulting arm of Brazilian coffee machinery maker Pinhalense in São Paulo.
The country is the leading producer of coffee, and one of the world’s biggest drinkers. Consumer research group Mintel says the growth in coffee drinking in Brazil means that the Latin American country will soon be the leading consumer of coffee, surpassing the US in the next few years. And the fall in arabica prices is likely to lead to more arabica in coffee blends.
Brazil’s rising number of coffee shops are driving demand for “gourmet” or higher-priced coffee, says Mintel.
“Brazilians are definitely much more demanding about their coffee, which is going to influence the coffee blends.” As a result, the country’s “higher quality beans will increasingly be used to service the Brazilian market”, says Mintel’s Renata Pompa.
The demand for better tasting coffee comes as the rest of the world has been turning to robusta, the lower quality bean. In Europe and the US, a big premium for arabica over robusta two years ago led to roasters adjusting their blends to reduce the more expensive arabica and add more robusta beans. That meant a fall in demand for arabica and greater consumption of the bitter tasting robusta.
Since then added support for robusta prices has come from rising demand for coffee in emerging markets – mainly in the form of instant coffee. Countries such as Thailand, Malaysia, the Philippines and Indonesia, where the main preference for coffee is instant, have seen double-digit demand growth over the past few years, says Volcafe, a leading European coffee trading group based in Switzerland.
Even as the rest of the world has shifted towards robusta, Brazilian farmers keen to cash in on the high premiums for arabica were producing more of the blend.
The resulting oversupply has sent the wholesale price of arabica beans in New York down more than 40 per cent in the past year to $1.25 a pound. Indeed, Arabica hit a four-year low of $1.17 a pound, a far cry from the 34-year high of $3.089 in 2011 amid fears of a shortage.
With the price difference between the two beans, down from as much as $1.90 a pound in 2011 to as low 34 cents this month, some coffee traders are asking whether the premium is now low enough to entice roasters to increase the ratio of arabica beans again.
There is evidence that lower grades of arabica have become competitive in the US and Europe, say coffee traders. “We are seeing some switching into arabica in small amounts,” says one Geneva-based trader.
A decline in the supply of robusta from Vietnam, the top grower of the lower quality bean, has also encouraged buying back into arabica among some smaller roasters.
But this may just be a seasonal move. European analysts say changes in blends take time to materialise. Larger roasters will be reluctant to switch back to arabica if consumers are happy with the blends on offer.
James Hearn, co-head of agriculture at commodities brokers Marex Spectron in London, says: “We have seen some shifting, particularly in producing countries that are also consumers. However, the shift elsewhere is modest at this stage.”