Weekly Coffee News
July 02, 2014
Dockworkers contract at West Coast ports expires, but negotiations continue and cargo keeps moving
by Brian Watt
A strike by port clerical workers in 2012 idled trucks at the Port of Los Angeles Brian Watt/KPCC A labor contract covering about 20,000 dockworkers at west coast ports expired at 5:00 p.m. Tuesday, but cargo continued to move, as negotiators on both sides said they’ll keep talking on a new contract. The Pacific Maritime Association (PMA) and International Longshore and Warehouse Workers Union (ILWU) have been in contract talks since May 12. They issued a joint statement shortly after 5pm Tuesday: While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached…Both sides understand the strategic importance of the ports to the local, regional and US economies, and are mindful of the need to finalize a new coast-wide contract as soon as possible to ensure continuing confidence in the West Coast ports and avoid any disruption to the jobs and commerce they support. Neither side had raised the possibility of a strike or lock-out, but memories of past labor stand-offs at the ports has caused anxiety among groups with ties to the industry. Retailers began moving goods through the ports early, causing an uptick in cargo volumes. The contract covers the work of around 10,000 dockworkers at the ports of LA and Long Beach. Together, the two ports form the busiest port complex in the country, handling more than a third of the trade between the U.S. and China. “It’s not just a matter of what happens at the port. It’s a matter of what happens in the broader supply chain,” said Tom O’Brien of the Center for International Trade and Transportation at Cal-State Long Beach. “Whether it’s a strike or lock-out, goods aren’t moving off ships onto the docks. That means truckers can’t pick up those goods, that means they can’t be processed at distribution centers or warehouses,” O’Brien said. The Los Angeles County Economic Development Corporation estimates more than 163,000 jobs in LA County alone are tied to trade and distribution of cargo. President Bill Allen said $415 billion in goods moved through the ports of LA and Long Beach last year. “The Ports of LA and Long Beach are investing about $5 billion to remain competitive, deepening and widening channels, improving terminals,” Allen told CNBC. “We are determined to continue to be the best way to move goods in and out of the U.S. economy.” O’Brien said a strike or lock-out could put LA-Long Beach’s supremacy at risk and jeopardize any West Coast port’s reputation as a viable gateway to the U.S. “Remember, shippers always have options, and they will look for the path of least resistance,” O’Brien told KPCC. “Right now, part of determining where the path of least resistance is the potential for labor unrest.” Shippers might find those paths at ports on other U.S. coasts, as well as Canada and Mexico.
June 23, 2014
Brazil’s main ports pause for home team’s World Cup matches
- RTRS 23-Jun-2014 12:41 SAO PAULO, June 23 (Reuters) -
Football fever is so intense in Brazil, the host of the World Cup soccer tournament, that even the main shipping ports in the commodity-exporting powerhouse are shutting down when the national team plays. In Paranagua, Brazil’s No. 2 soy exporting port, the dock workers’ union negotiated an ordinance that lets them stop working an hour before the match and resume work an hour afterward for a total of around four hours to relax and watch the Brazilian team. “This is unprecedented,” said the port’s press representative, Samar Razzak, who added that the port usually operates even during the New Year’s and Christmas holidays. Brazil has not hosted a World Cup since 1950. Dock workers went on strike several times last year and it is seen as in the interest of port authorities to keep them happy as soybean shipments wind down and sugar and coffee pick up in the world’s top exporter of those commodities. The agreement in Paranagua applies to Brazil’s matches during group play, including Monday afternoon’s final group match against Cameroon, Razzak said. The match kicks off at 2000 GMT. If Brazil advances to the next rounds of the tournament, which begins June 28 and ends July 13, a new ordinance will likely be drawn up, she said. In Santos, the port that accounts for 25 percent of Brazil’s shipping trade, individual terminal operators decide what to do during the national team’s games, a port spokesman said. During the previous two Brazil matches on June 12 and June 17, most terminals halted operations for two hours during the games and resumed work shortly thereafter, the spokesman added. Administrative workers at both Santos and Paranagua planned to leave work at 1 p.m. local time on Monday, though some mooring and security workers were to continue working. Financial markets, banks and other companies have also closed early on game days in Latin America’s largest economy. (Reporting by Caroline Stauffer and Gustavo Bonato, editing by G Crosse)
May 21, 2014
Colombia coffee exports to hit 21-year high
Colombia will strengthen its newly-rediscovered grip on third rank among world coffee producers next season, lifting its harvest to a seven-year high, while heavy rains lower output in rival Indonesia.
Colombian coffee production will hit 11.9m bags in 2014-15, the highest since 2007-08, as bushes mature that were planted a reseeding programme aimed at promoting varieties resistant to the rust fungus, the US Department of Agriculture’s Bogota bureau said.
“Replanting efforts with rust resistant varieties and the return to more normal weather conditions have continued to support a production recovery,” the bureau said in a report.
Besides the wait for new trees to mature, Colombian output was also held back during 2009-11 by excessive rains, blamed on the La Nina weather pattern, which promoted ideal conditions for the spread of rust.
But output has recovered strongly since, and its forecast to hit 10.8m bags this season, with rust believed to have affected “only” 7% of coffee area.
Colombia vs Indonesia
The rise in production will lift exports to 11.59m bags, a 21-year high, the bureau said,
“Colombian coffee exports have been expanding significantly since 2013,” with more than 40% going to the US.
The South American country’s rising fortunes contrast with those of Indonesia – which overtook Colombia to take third rank in coffee output between 2008-09 and last season, when output was depressed first by hot and dry weather which reduced flowering, before excessive rains set back fruiting.
Production in the South East Asian country is seen falling for a second successive season in 2014-15, to 8.9m bags, depressed by “excessive precipitation during the 2013 dry season”, which disturbed pollination of the flowers bearing this year’s cherries.
“Robusta coffee, which requires wind and insect pollination, is expected to face declines up to 500,000 bags,” the bureau said.
Indonesian output is also being held back by “poor agricultural practices” and by the extent of old trees, with waning yields.
El Nino threat
Indonesia’s woes will curtail its exports to a seven-year low of 7.2m bags in 2014-15, more than 4m bags behind those of Colombia.
However, Colombian growers may yet face their own weather setbacks if an El Nino weather pattern begins this year, as expected, and which has a history of cutting the country’s rainfall levels.
Official Colombian meteorologists say that “the El Niño phenomenon is on the horizon, and will create drought conditions towards second half of 2014, which could stem the ongoing production recovery and affect coffee quality”.
Drier weather would also encourage outbreaks of the broca cherry borer beetle, “also impacting coffee quality and exportable supplies”.
Some concern over Colombia’s recovery was also raised last week when data for April showed the first year on year fall in monthly output since 2012, with output falling 14% to 832,000 bags.
In March, production rose 34% year on year.
By Agrimoney.com – Published 20/05/2014
May 19, 2014
Coffee fungus raising prices for high-end blends
E – In this Feb. 9, 2013, file photo, small coffee producer Hector Perez show coffee beans damaged by the roya fungus in San Gaspar Vivar, Guatemala. The U.S. government is stepping up efforts to help Central American farmers fight a devastating coffee disease _ and to keep the price of your morning cup down. A fungus called coffee rust has already caused more than $1 billion in damage across the Latin American region. It is especially deadly to Arabica coffee, the bean that makes up most high-end, specialty coffees, and it is already affecting the price of some of those coffees in the United States. (AP Photo/Moises Castillo, File)
WASHINGTON (AP) — The U.S. government is stepping up efforts to help Central American farmers fight a devastating coffee disease — and hold down prices.
At issue is a fungus called coffee rust that has caused more than $1 billion in damage across Latin American region. The fungus is especially deadly to Arabica coffee, the bean that makes up most high-end, specialty coffees.
Already, it is affecting the price of some of those coffees in the United States.
“We are concerned because we know coffee rust is already causing massive amounts of devastation,” said Raj Shah, head of the U.S. Agency for International Development.
On Monday, he was expected to announce a $5 million partnership with Texas A&M University’s World Coffee Research center to try to eliminate the fungus.
But the government isn’t doing this just to protect our $4 specialty coffees, as much as Americans love them. The chief concern is about the economic security of these small farms abroad. If farmers lose their jobs, it increases hunger and poverty in the region and contributes to violence and drug trafficking.
Washington estimates that production could be down anywhere from 15 percent to 40 percent in coming years, and that those losses could mean as many as 500,000 people could lose their jobs. Though some countries have brought the fungus under control, many of the poorer coffee-producing countries in Latin America don’t see the rust problem getting better anytime soon.
Guatemala, El Salvador, Honduras, Panama and Costa Rica have all been hard hit.
Much of the blander, mass-produced coffee in this country comes from Asia and other regions. Most of the richer, more expensive coffees are from small, high altitude farms in Central America. Because the farms are smaller, farmers there often don’t have enough money to buy the fungicides needed or lack the training to plant in ways that could avoid contamination.
The rust, called roya in Spanish, is a fungus that is highly contagious due to airborne fungal spores. It affects different varieties, but the Arabica beans are especially susceptible. Rainy weather worsens the problem.
“We don’t see an end in sight anytime soon,” said Leonardo Lombardini of Texas A&M’s World Coffee Research.
So far, major U.S. coffee companies have been able to find enough supply to avoid price increases. But some smaller outfits already have seen higher prices, said Ric Rhinehart of the Specialty Coffee Association of America.
Rhinehart said the worst-case scenario is that consumers eventually will pay “extraordinarily high prices for those coffees, if you can find them at all.”
He said some very specialized varieties from a single origin — Guatemalan antigua coffees, for example — have been much harder to source. If the problem continues, he says, some small coffee companies either will raise prices or use blends that are easier to find, decreasing the quality of the coffee.
Larger companies such as Starbucks and Keurig Green Mountain Inc. have multiple suppliers across the region and say they have so far been able to source enough coffee.
“It’s a little bit too soon to tell what the impact will be on supply and long term quality over time,” said Lindsey Bolger, who heads up coffee sourcing for Keurig Green Mountain.
Still, the companies are trying to ensure that their future supply isn’t affected, so they are working closely with growers on better practices that will help them avoid contamination.
“Supporting the farmer’s ability to access information, technology and resources allows them to adapt to these uncertainties and ensures the longevity of our industry’s supply chain,” said Craig Russell, Starbucks Global Coffee executive vice president. Starbucks even bought a Costa Rican farm for research purposes.
USAID intends to work with Texas A&M to step up research on rust-resistant coffee varieties and help Latin America better monitor and respond to the fungus. The U.S. already collaborates with some of the coffee companies and other international organizations to finance replanting of different varieties of trees.
The effort is part of the Obama administration’s Feed the Future program, which aims to rid the world of extreme poverty through agricultural development and improved nutrition.
While the effort has helped hungry children around the globe, “we’re at risk of backtracking because of coffee rust,” Shah says.
May 06, 2014
A Coffee Crop Withers
Fungus Cripples Coffee Production Across Central America
By ELISABETH MALKIN
SAN LUCAS TOLIMÁN, Guatemala — When coffee rust attacked the farms clinging to the volcanic slopes above this Mayan town, the disease was unsparing, reducing mountainside rows of coffee trees to lattices of gray twigs.
During last year’s harvest, Román Lec, who grows coffee on a few acres here, lost half his crop. This year, he borrowed about $2,000 for fertilizer and fungicide to protect the plants, as he did last year. But the disease returned and he lost even more.
“There are nights when you cannot sleep, thinking how to pay back the money,” said Mr. Lec, 65.
A plant-choking fungus called coffee rust, or la roya, has swept across Central America, withering trees and slashing production everywhere. As exports have plunged over the last two years, the effects have rippled through the local economies.
Big farmers hire fewer workers to pick the ripe coffee cherries that enclose the beans. Smaller farmers go into debt and sell livestock or tools to make up for the lost income. Sales fall at local merchants. Teenagers leave school to work on the farm because their parents can no longer hire outside help. At the very end of the chain are the landless migrant workers who earn just a few dollars a day.
“If you frame this in terms of everyone that is connected to the economics of coffee, it’s a very serious problem,” said Roberto de Michele, a specialist at the Inter-American Development Bank who is based in Guatemala City.
The coffee rust has spread far and fast, driven by higher temperatures in the region that have allowed the fungus to thrive at higher altitudes. Many experts say climate change is largely to blame for the shifting weather patterns.
The economics of the business have added to the farmers’ plight. After years of low coffee prices, smaller farmers could not afford to replace aging coffee plants, which have proved more vulnerable to the rust’s attack.
“There was nothing to hold it back because the farms were in very poor shape,” said Maja Wallengren, a coffee expert based in Mexico.
The trouble here is just one of several factors that are pushing up prices in the global commodity market, increases that may carry over to supermarket shelves and the specialty coffee houses that sell the high-grade arabica coffee for which Central America is known. Market prices have risen 70 to 80 percent since November, driven mostly by drought in Brazil, the world’s largest producer.
In Central America, the pain is acute. Four million people there and in southern Mexico rely on coffee for their living, according to the Inter-American Development Bank. Twenty percent of the half-million jobs in Guatemala directly tied to the crop have already disappeared, estimated Nils Leporowski, the president of Anacafé, the country’s coffee board.
The rust outbreak has pushed many families to the edge of survival.
“Roya has exposed the depth of the social and economic problems in terms of people’s vulnerability to the market and to climate change,” said Peter Loach, the Guatemala director of Mercy Corps, an aid agency. “What makes it different and complicated is that it’s a slow-onset natural disaster over two to three years.”
Even in good years, José Obispo Tax Talé, 34, had to scrimp to feed his eight children. In the past, his work as a day laborer on coffee farms would give him just enough money to rent land, buy fertilizer and grow corn for food.
This year, the lean season, when food supplies run out for the poorest farmers, started two months early, according to the Famine Early Warning Systems Network, a monitoring service, because of falling coffee earnings and reduced corn yields over the last couple of years. Forecasts of irregular rainfall this summer raise additional concern.
“Year after year, these families are confronted by layers of vulnerability,” said Anne Valand of the World Food Programme, who estimated that as many as 300,000 Guatemalans could need emergency food aid later this year. “Bit by bit, the layers are becoming thinner.”
As the coffee rust has taken hold, farmers have been spending much of their time and money trying to fight the disease by spraying fungicide, replacing or cutting back old plants, and managing the shade trees that filter sunlight and appear to reduce the spread of the rust.
“People are scared of the roya,” said Nicolás Leja, who farms about seven acres in plots in San Antonio Palopó, a nearby municipality. He pruned his trees and sprayed fungicide, but it proved futile. He has lost as much as 60 percent of his production over the last two years.
Instead of hiring four workers for the harvest as he usually does, he relied on extra labor from his 18-year-old son, who put off plans to study medicine.
The changing fortunes of Guatemala’s small farmers raise the question of whether some of them should continue to grow coffee at all or instead should switch to food crops. Some say they could not make the change even if they wanted to.
“Beans and corn don’t grow well here,” Mr. Leja said, pointing at the steep hillside. “The coffee income is very important. It pays for corn and beans.”
The latest epidemic of coffee rust began in Central America three years ago. It spread rapidly last year, prompting most governments to declare states of emergency. Last year’s harvest fell 15 percent in Guatemala, and neighboring countries had losses as big and even bigger. Export figures suggest that Guatemala’s harvest this year has fallen an additional 10 percent.
Nobody has escaped. Guillermo Ríos, a midsize producer who grows coffee on 37 acres near the Mexican border in Huehuetenango, said he had sprayed fungicide four times and managed to limit the outbreak to just 10 percent of the plantation.
“My priority is to rescue what I invested,” he said in a telephone interview. But his profit was minimal, and the higher costs have halted his plans to add plants on additional land he owns. He will hire fewer workers than he expected.
While rust hit Central America in the 1970s and 1980s, the outbreaks were contained at lower altitudes. This rust outbreak has advanced to the highest altitudes, including the steep slopes here around Lake Atitlán. Rising temperatures and extreme weather, like flooding, have encouraged roya’s spread, said Ana R. Ríos, a climate change specialist at the Inter-American Development Bank.
With the changing conditions, the industry is intensifying efforts to breed varieties that are resistant to rust and heat stress while maintaining their quality. But the research is only beginning, and it may take 25 or 30 years before resistant hybrids reach farmers, said Leonardo Lombardini, the deputy director of World Coffee Research at Texas A&M University.
“The problem is that farmers are struggling and also the climate is changing rapidly,” Mr. Lombardini said. “The window of climate conditions for arabica is relatively narrow.”
Researchers are also growing plants from seeds collected all over the world and sending them to different countries for field trials to see where they thrive. That should give farmers who do not have much money to invest some assurances that when they replace their old trees, the new ones will be productive.
In the meantime, the priority is returning the farms to health.
Guatemala’s agriculture ministry provided small farmers with fungicide last year, although many complained that it reached them too late or that it was not enough. Others simply sold it. The government has increased the amount of money in a fund to provide low-interest loans to $100 million and extended it to 2026. The fund had only $28 million when the measure was approved last fall.
“The coffee here is positioned for its quality like the wines of France,” said José Sebastián Marcucci, Guatemala’s vice minister of agriculture. “The majority of coffee comes from the small producers. I hope that they can be motivated.”
With help from Anacafé, the government is showing farmers how to prune and replace their trees. They also plant beans and vegetables between the coffee seedlings to provide food while they wait three years for them to start producing.
More and more farmers are listening. Servando Santos, 56, the manager at the San Miguel Integrated Agricultural Cooperative in Tzampetey, said he fought off the rust by spraying fungicide, using fertilizer and controlling the shade over his plants. “You have to adapt to the roya,” he said. “You have to make friends with it.”
April 09, 2014
Coffee Flour … coming to a cake near you…
Two years ago, Dan Belliveau hit upon the idea for a new product: Coffee Flour. A former director of technical services at Starbucks, Belliveau had learned about coffee production while designing and building roasting facilities. The process, he realized, resulted in lots of waste, which could be used.
The dried, roasted coffee beans we use to make our java are actually seeds that have been extracted from bright red fruit known as coffee cherries. Once farmers remove the beans, they are left with a huge amount of edible, nutrition-rich cherry pulp. In some countries the byproduct is dried and used to make tea, but, for the most part, it’s simply discarded and left to rot. Suspecting there must be a better way, Belliveau took it upon himself to create a rudimentary coffee berry flour and began experimenting. “My wife made some shortbread cookies and granola,” he says. “When it actually tasted good we thought, wow, we’ve got something here.”
Photograph by Nathon SimsToday, Belliveau’s Vancouver-based startup, CF Global Holdings, has developed a patent-pending process for the milling of commercial-grade coffee flour. Gluten free, the product has three times more iron than spinach, three times more protein per gram than kale, and five times more fiber than whole grain flour, according to the company. “Most flours are somewhere between 5 and 12 percent fiber,” says Belliveau. “Coffee flour is 55 percent fiber.”
The java flour doesn’t taste particularly like coffee—it has a “sweet, dried fruit flavor,” says Belliveau—nor does it have much caffeine. To get a jolt equivalent to one cup of joe, a person would have to eat anywhere from seven to 16 slices of bread made with about 20 percent coffee flour. (To get a palatable consistency and texture, coffee flour is best used in combination with other grains.) Also, the edible caffeine product tends to have a slower, more sustained effect than liquid coffee.
With mills churning in several countries, CF Global plans to produce about 350,000 pounds of coffee flour this year. The startup received an undisclosed amount of funding from private investors and from industry giants Mercon Coffee and Ecom Coffee; Intellectual Ventures, a firm started by former Microsoft CTO Nathan Myhrvold, also invested and helped with the patenting process.
Belliveau says his process requires only minor tweaks to existing coffee manufacturing equipment and that farmers will profit while only expending about an extra 25 percent effort, since they already have the coffee waste on hand. CF Global hopes the added sales will help farmers take home an extra 30 percent to 50 percent of what they get from manufacturing coffee beans.
Even if it doesn’t pack a huge wallop, caffeine-laced flour will undeniably have appeal. U.S. retail sales of caffeinated foods totaled about $1.6 billion in 2012, a 49 percent jump since 2008, and the growing list of bizarre caffeinated products includes Bang!! Caffeinated Ice Cream, Perky Jerky, Java Mallows, Cracker Jack’D Power Bites, and Wired Waffles. There’s even a patent-pending topical caffeine spray called Sprayable Energy, which is spritzed on the same way as perfume or cologne (“preferably on the neck for greatest effect,” say the inventors).
March 25, 2014
Brazil Drought Rewards Coffee Hoarders Selling at Two-Year Highs
By Gerson Freitas Jr.
March 25 (Bloomberg) — Brazil’s worst drought in decades is coming with a silver lining for coffee growers responsible for one in every three cups of fresh java drunk in the world.
A price surge as the dry spell hurts crops is allowing farmers to sell stockpiled coffee at a profit for the first time in a year to pay debt and fertilizer bills. Sales at the highest price in two years will more than offset output losses and leave farms less pressed for cash when harvesting starts next month, according to growers and analysts.
“The price situation was stifling before,” Lucio Dias, commercial superintendent at Cooxupe, the world’s largest coffee-growers cooperative, said in an interview from Guaxupe, Brazil. “Now that prices improved, growers rushed to sell stocks to make some cash.”
Brazilian coffee trees suffered the driest and hottest start of the year in at least six decades, fueling a rally that sent New York futures to a two-year high on March 12. Roasters, who until December were buying the bare minimum on the prospect of ample supplies and lower prices, have been speeding up purchases because of uncertainty over the crop that growers will start harvesting in April or May, Gil Barabach, an analyst at crop researcher Safras & Mercado, said from Porto Alegre.
“Coffee stocks moved from the supply side to the demand side,” he said. “Farmers are now more capitalized and won’t be pressured to sell during the harvest.”
Cooxupe’s 12,000 producers have sold 2.2 million bags at rising prices since the beginning of the year, which represent about 44 percent of their usual annual sales and more than Costa Rica produces each year.
The stockpile sales will help support prices during the harvesting period because farmers won’t need to sell large volumes to pay debt, Dias said.
Coffee touched $2.0975 a pound on March 12, the highest since February 2012 and more than double a seven-year low of about $1 in early November. Futures pared part of the gain last week after producing areas in Brazil received some rain and closed at $1.764 a pound on ICE Futures in New York yesterday.
Futures probably will remain close to $2, a level that’s not high enough to encourage growers to boost output and still affordable for roasters, Roberio Silva, executive director of the London-based International Coffee Organization, said yesterday in an interview at a seminar in Sao Paulo.
“We expect supply and demand to remain balanced at current prices,” Silva said. “We see a healthy stockpile transfer from farmers to roasters.”
Last year, producers were offered to sell some of their output to the government at subsidized prices when the local market was paying less than the cost of about 300 reais ($129) per 60-kilogram (132-pound) bag. They were paid as much as 485 reais this month, according to data from the University of Sao Paulo’s Cepea agricultural research agency.
“Many roasters postponed coffee purchases because they were betting in even lower prices,” Eduardo Carvalhaes, a trader at Escritorio Carvalhaes, Brazil’s oldest coffee-trading firm, said by phone from the port city of Santos. “When the drought came, everyone rushed to do business.”
Jose Maria Pontes, a coffee farmer in Monte Santo, sold about 70 percent of the stockpiled production from his 145-hectare (360-acre) farm after prices climbed above 300 reais per bag by the end of January.
“Everybody had that level in mind,” Pontes said during a coffee break at a farmers meeting in Cooxupe’s headquarters. “Now, we’re looking at the 500-real level.”
Cicero Moreira da Silva, who had sold about 60 percent of last year’s crop at a loss for 250 reais a bag on average, was able to sell the remainder for as much as 360 reais after February’s rally.
“It was hasty of me,” said Silva by phone from Guaxupe. “If I had waited a little longer, I could have sold it for at least 450 reais.”
For the coming crop this year, Silva has locked in prices as high as 490 reais a bag on about 30 percent of production for delivery in September. The rising prices will more than offset an estimated 10 percent production loss because of the drought in his farm.
“The drought was a good deal because I won’t lose that much coffee,” he said. “We still don’t know for sure what the effects on future crops will be.”
March 06, 2014
Colombia coffee exporters fight ‘price war’ after contract defaults – RTRS
By Peter Murphy
BOGOTA, March 5 (Reuters) – Some arabica coffee buyers in Colombia have ripped up supply contracts with exporters, setting off a price war for high-quality beans in the first sign a 75 percent surge in prices so far this year is starting to disrupt the market, exporters say.
Trading houses have been forced to scramble to source spot supplies at far higher costs after middlemen, a small but crucial group of traders who source coffee from farmers, defaulted on supply contracts amid wild price volatility.
The defaults in the world’s No. 1 washed arabica producer will add to unease in the coffee market amid arabica’s biggest rally in decades and could mark the start of problems the physical market has been bracing for as a prolonged drought and devastating fungus damage crops in Central and South America.
News of strains in the market also comes after the International Coffee Organization (ICO) warned this week that the global market could flip into a deficit this year for the first time in five years.
To be sure, there have been no reports of defaults by exporters and the supply squeeze in Colombia will likely ease as the ‘mitaca,’ or mid crop, gets under way in the coming weeks. The country is expected to produce a large crop of about 11.3 million 60-kg bags this year
But it may feed fears that at worst, delays or defaults on domestic contracts could force exporters to walk away from their own commitments, which would shred trust they have earned with importers and roasters in the close-knit industry.
With crops in Central America and Mexico down due to the roya or leaf rust fungus and Brazil’s farmers bracing for losses due to the devastating drought, some fear roasters may have few alternatives for Colombia’s washed, mild arabicas.
SUPPLY DEALS DITCHED
A trader at one exporter said he was now engulfed in “a big price war” as some middlemen commit batches of coffee to one bidder after another, ditching the deals each time a better offer comes along.
He said smaller exporters would be most vulnerable to defaults as they lacked the deep pockets of large trading houses to secure supplies in the fiercely competitive market.
From afar, U.S. traders worry that arabica’s breathtaking rally could trigger a wave of defaults along the supply chain.
“High prices, and especially in markets that move this quickly, bring about all kinds of problems, one of the biggest being defaults,” said Bob Phillips, president of Caturra Coffee Corp in Elmsford, New York.
Phillips buys primarily from Brazil and said he hadn’t experienced any delivery problems so far.
On Thursday, contracts traded on New York’s ICE futures exchange retreated back below the $2 per lb they had hit on Wednesday for the first time in two years, to $1.96 per lb.
In some cases, as much as half of the coffee contracted via middlemen failed to turn up, traders said.
“This weekend we had to go to get it ourselves,” said a trader at one local exporter. His staff had to buy directly from farmers after his supplier failed to deliver beans they had forward sold before the surge, at lower rates.
Rising 75 percent so far this year, arabica coffee is by far the best performer on the Thomson Reuters/CoreCommodity CRB Index .TRJCRB, trailed by lean hogs in second place, which have risen 29 percent.
COLOMBIA MID-CROP COMING
Any stumbling on contracts would put further strain on roasters and traders who are now forking out twice as much for their beans as they would have in November when prices were at seven-year lows close to $1.
“I think some intermediaries went ‘short’ at the beginning of the year. … The rest are just trying to take advantage of the situation and make money from it,” he said.
Defaults by exporters are rare given the strong incentives the companies have to fulfill their contracts. The cotton trade is still working through a backlog of legal disputes after defaults in 2011 when prices quite suddenly doubled.
“We lose out by buying coffee at a higher price, but it is worse to not fulfill your contract and have claims against you and see your reputation suffer,” said the trader at a multinational exporter based in Bogota.
(Additional reporting by Marcy Nicholson in New York; Editing by Jonathan Oatis)
February 28, 2014
Climate Change May Be Causing a Global Coffee Shortage
10 percent of Brazil’s most productive coffee-growing regions may be fallowed in just a few years.
If there was ever a reason to rise up in support of a benevolent climate-obsessed world dictator, this could be it.
An epic drought—Brazil’s worst in decades—is threatening exports from the world’s largest coffee exporter and driving up wholesale prices worldwide. We’ve officially entered the realm of bloggers’ worst-case scenario.
Now, let’s not get too hasty. The world is not going to run out of coffee next week. Analysts still estimate an increasingly tight global coffee surplus of less than 1 percent of total production through the remainder of the year. But the Brazilian drought is causing a significant pressure on global supplies, and when coupled with burgeoning demand from increasingly affluent consumers in Asia (and Brazil itself), that means prices are surging and that surplus could quickly become a shortage if the drought continues to intensify. Arabica coffee futures are up more than 50 percent in just the last two months in response.
The current run on coffee is an example of the kinds of follow-on effects to be expected as the climate warms and rainfall patterns become more erratic. The ongoing lack of rainfall, coupled with record high temperatures across the whole of southeast South America during the current Southern Hemisphere summer, is just the kind of extreme weather event that’s been becoming more common over recent years. In an era of scientific consensus that we humans are doing this to ourselves, this shouldn’t come as a surprise.
Back in 2011, Starbucks’ head of sustainability Jim Hanna called increasingly extreme weather linked to climate change a “potentially significant risk to our supply chain.” But Brazil’s government—much like ours here in the United States—seems to have its head stuck in the sand on what to do about it.
NPR’s Weekend Edition has a fascinating look at the long-term implications of Brazil’s drought and dips a toe into the local politics:
What one farmer feels far into the Brazilian countryside is pretty much exactly what scientists in Brazil’s cities are saying, too.
Hilton Silveira Pinto is an agro-climatologist who has worked on a number of studies for EMBRAPA, Brazil’s government agency for agriculture.
“The regions where we plant coffee today, especially the ones on lower elevations, will be getting hotter,” he says. “And many of the coffee plantations in these areas will probably have to be abandoned.”
Since coffee is grown on carefully cultivated trees, it takes years for a plantation to reach maturity. As ideal coffee growing regions shift higher in elevation in a warming climate, existing plantations will force abandonment. NPR notes that some estimates project up to 10 percent of Brazil’s currently most productive coffee-growing regions will be fallowed in just the next few years.
The part of Brazil being hit hardest is in its highly populated southeastern corner, well south of the Amazon rainforest. In Brazil, climate models have mixed results when projecting future rainfall patterns (wetter for the southeast, but drier over the Amazon and the northeast), but are unambiguous about the fact that temperatures will continue to climb. This is a problem that is not going to go away.
And it’s not just coffee that’s being affected in the current drought. Brazil is also the world’s largest exporter of sugar, oranges, soy, and cattle. Prices for those commodities are also surging in response to the drought in South America. Some cities in Brazil have already begun water rationing. This week, Reuters reported that Brazil may have to lower its 2014 economic growth forecast as a result of the ongoing drought.
Looking ahead for the remainder of the Brazilian summer rainy season and into the autumn (March through May), the atmospheric odds seem to be stacked against any kind of significant rebound in rainfall any time soon. In fact, it seems increased dryness is the most likely scenario.
Let the coffee hoarding begin.
February 28, 2014
Drought and coffee culture: what plant physiology has to explain
Drought and coffee culture: what plant physiology has to explain – by Jose Alves Donizeti*
In view of this catastrophe that Brazilian coffee is going through, I would like to add some points that have not been discussed or if they have been that was made in a hypothetical manner.
Much has been said about the effects of drought in coffee growing. And I, sorry for the pun, do not want to “flog a dead horse”. The fact that no one disputes is that this meteorological anomaly had not manifested itself in decades. At least in terms of strength and durability. Unfortunately this time it was accompanied by temperature and luminosity extremely high and occurred/occurs in phenological phases which are most demanding in terms of water temperature and adequate luminosity.
The practical consequences of all this have also been shown and discussed in this place. In terms of producing what you see is the leaf shriveling; small dehydrated fruits with detachment of parchment (hardened) from the seed, mummified malformed grains, high percentage of void grains. All these physiological abnormalities should be seen as QUITE HIGH. This is the fundamental difference of this drought with the ones in past years. In other words: without any intention of being alarmist or supporter of “the worse the better”, the situation of Brazilian coffee culture this time is extremely serious. Obvious conclusion: 2014 season is strongly committed both in terms of quantity as quality. In my opinion, after visiting several coffee growing regions, I deduct that the loss will vary between 20-45% depending on the region.
In terms of vegetative growth, the drought and heat came at a time of full growth of leaves and branches. Therefore, that was also damaged. This is to say that the 2016 season will also suffer negative consequences of this drought. As the blooming phase (not flowering) will start in the coming weeks, we will probably have problems of induction of reproductive buds which will also reflect negatively on the 2015 harvest. But these are subject of further analysis.
Concerned about the current moment, my team went to the field (before the drizzle last week) to do a mapping of the coffee canopy measuring various physiological parameters in a horizontal gradient (the tip of the branches to the inner canopy, near the trunk) and vertical (the apex of the plants to the base of the leaves). Data is being compiled because they are objects of a dissertation, but preliminarily revealed interesting aspects and yet unpublished literature on coffee culture.
The leaves at 5am had an average temperature of 21° C (see that the night was hot) at 3pm this figure rose to 38° C. The temperature of the trunk at this same time on the base of the leaves was 33° C. These high temperatures will seriously compromise the photosynthesis, as will be seen later.
The hydroelectric potential which shows the degree of hydration of the plant, in other words, the water that can maintain work, measured at 5am was -1.1 MPa. That is to say the coffee tree did not recover during the night, the water lost during the day. This is because the amount of water stored in the soil was not sufficient for this. And to make matters worse, we detected intense death of rootlets. From noon until 3pm, the hydroelectric potential had become extremely low reaching values of -2.3 MPa . This value for certain crops mean “permanently wilting” or death of the plant. For coffee, according to numerous researches, it is a value that causes serious damage, such as, declining photosynthesis and translocation of carbohydrates, wilt and leaves falling, drought of the tips of the branches, roots death, decrease in the number and crop yield, amongst others. Most importantly, the coffee tree does not die, and with the return of the rains it regains its turgor. But the damage caused by the loss of dry matter (leaf falling, fruits and dried tips of the branches) are irreversible.
At 9am, photosynthesis, as expected, was the highest, but their value in the leaves from the base, was on average 64% lower when compared with those of the apex. Likewise, the innermost leaf canopy had photosynthesis 54% lower than those exposed to the sun. From that time, photosynthesis declined substantially and at 3pm, the region of the crown with maximum photosynthesis showed a 75% lower rate when compared to the same region photosynthesis at 9am. The inner leaves of the canopy as well as the lowest leaves showed photosynthetic rates near zero.
In summary, considering all the canopy of coffee culture, photosynthesis in most of the time operated in extremely unsatisfactory rates and certain moments even negatively. That means that the contribution of carbon for plant growth, which is equivalent to the bricks of a wall under construction, was minimal and in some cases were broken. And for those who understand at least a little of plants biochemistry will see that the carbon gain is enough just to maintain the plant alive. Very little or nothing will be left for plant growth, ie, if it was a new building site, it would not have walls and in some areas we would have demolished walls.
Based on these data now, responding to numerous inquiries that had been made to me, I think that even if the rains return, there will not be enough time (until the dry and cold season arrives) for the “fruit filling” and this equals to saying that this empty space, that many are observing when they cut the fruit crosswise, will no longer be filled, or if it is, will be very little. In conclusion, the yield loss at harvest, as many are empirically assuming will happen, for sure.
These placements of mine come in order to give satisfaction to people who ask me why I did not speak out until now. I did not, because it was collecting field data to be able to make the statement I made in the previous paragraph. To not prolong myself any further, in the coming days I will pursue the matter.
*Professor at the Federal University of Lavras. Degree in Agricultural Engineering from the Lavras Superior Degree of Agriculture, today Federal University of Lavras (UFLA), Masters in Plant Physiology from Federal University of Viçosa, PhD in Soils and Plant Nutrition from Federal University of Viçosa and Post-Doctorate from The Ohio State University and University of Missouri. In UFLA was Head of the Department of Biology, Coordinator and Sub – Coordinator of the program of Graduate Studies in Plant Physiology. In the Brazilian Society of Plant Physiology held the positions of Vice President, Treasurer, Chief Editor of the Brazilian Journal of Plant Physiology where he currently serves as Associate Editor. He was the President of the XIV Brazilian Congress of Plant Physiology held in Poços de Caldas from 09 to 12 September 2013. He has experience in the areas of Botany with emphasis on Plant Physiology, working mainly in the areas of nutrition and metabolism and physiology from the yield of coffee culture and plants under conditions of anaerobic stress. He is the current Coordinator of the Post-graduate program of Plant Physiology at UFLA