Weekly Coffee News
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
This story originally appeared in Slate and is republished here as part of the Climate Desk collaboration.
If there was ever a reason to rise up in support of a benevolent climate-obsessed world dictator, this could be it.
Climate change has already taken the Winter Olympics, your Eggos, and the McDonald’s dollar menu, and now it’s coming for your coffee, too.
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.
A satellite-based vegetation health index shows the change between February 2013 and last week. Areas of intensifying drought are shown in brown. NOAA Center for Satellite Applications and Research
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.
The forecast for March through May 2014 shows a continuation of abnormally dry conditions across Brazil. NOAA National Multi-Model Ensemble.
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
February 28, 2014
Rain in Brazil may be too late…
Forecast rain may pour cold water on Brazil’s Carnival festivities in the next few days, but the country’s farmers are looking forward to getting a drenching.
After a January that ranked as one of the hottest and driest on record, heavy rains expected across the south of the country will be a welcome relief for the region’s farmers.
Panic has spread across global agricultural markets over the past few weeks as Brazil’s January drought ravaged crops in the country that is the world’s top producer of coffee, sugar and orange juice, and a big supplier of grains such as soyabeans and corn.
Coffee has been one of the leading gainers in commodities markets this year as fears have focused on potential losses of up to 15 per cent of the crop. The benchmark coffee price in New York has surged almost 60 per cent since the start of the year, hitting a 16 month high of $1.8125 a pound earlier this week.
“January in Brazil is meant to be one of the wettest months of our summer and everyone who planted crops kept waiting for those big rainstorms to come but they just never did,” says Graziella Gonçalves, a meteorologist at Somar in São Paulo.
A stubborn area of high pressure in the centre-south in January not only deprived the country’s most fertile regions of rainfall but it also drove up temperatures to an all-time high in states such as São Paulo. While it will only be possible to calculate the damage to Brazil’s coffee crop by harvesting it, many beans are likely to be smaller than normal or with thicker skins affecting yields. Others simply will not have developed at all.
“It’s a bleak scenario,” says Carlos Brando, director of P&A International, the coffee consultancy.
The Brazilian coffee exporter Terra Forte has estimated that the drought destroyed as much as 15 per cent of the country’s crop of arabica – the higher quality bean favoured by retailers such as Starbucks. Meanwhile, the government this week said it suspected up to 45 per cent of beans had been damaged in the worst-hit part of Minas Gerais, the state that produces half of the country’s coffee.
Rains finally returned to the southern half of Brazil in the middle of this month and are expected to continue into March. However, it is unclear whether the cold front will extend to Minas’ most important growing region in the south.
Sugar prices, which had been falling for the past two-and-a-half years due to the glut in global cane and beet production, have also followed suit. The ICE March sugar benchmark hit a five-month high of 17.77 cents a pound this week, rallying more than 20 per cent since a four-year low at the end of January.
Although some analysts had earlier regarded the soil moisture in the key centre-south region to remain sufficient, Copersucar, the world’s largest sugar and ethanol trader, on Monday cut its cane crop estimate for the centre-south to 570m tonnes from 610m tonnes as a result of the drought.
Brazilian mills now expected 5 to 10 per cent less cane than previously anticipated, says Jonathan Kingsman, head of the eponymous sugar consultancy, in Switzerland.
Meanwhile, the outlook for other crops such as soyabeans and oranges is more sanguine.
Concerns about South American supplies and firm demand have pushed up soyabeans to five-month highs above $14 a bushel. However Soren Schroder, chief executive of Bunge, told analysts earlier this month that he was still confident of a record soyabean crop this year. “The northwestern part of Brazil is probably better than people expect, and there are some parts of the south that are a little bit worse but on average, the soyabean crop in total looks to be really just an excellent one,” he said.
Orange farmers may also get off lightly, says Ibiapaba Netto, the head of the Brazilian Association of Citrus Exporters, CitrusBR. “We could still see some effect from the drought but oranges are a bit different to other crops because they are more resistant,” he says.
However, in a cruel twist of fate, the heavy rains over the next few days may not only get in the way of Carnival celebrations. After praying for rain for weeks, farmers are now struggling to bring in their soyabeans in states such as Mato Grosso because the heavy rainfall is making harvesting impossible.
Additional reporting by Gregory Meyer in New York
February 19, 2014
Cup of coffee?
As Coffee Soars, That Cup of Joe May Get Pricier
Dry Weather in Brazil Fuels Fears for Crop
Updated Feb. 18, 2014 4:10 p.m. ET
Caffeine junkies should brace for bad news: Their morning jolt could get more expensive soon.
Coffee prices on Tuesday staged their biggest gain in nearly a decade in the futures market, taking the rise for the year to 38%.
Prices of arabica coffee beans for delivery in March, the front-month contract, shot up 12.75 cents, or 9.1%, to a 13-month high of $1.5265 a
pound on the ICE Futures U.S. exchange. That was the biggest one-day percentage increase since November 2004.
Roasters and analysts said higher prices at the espresso bar and in the supermarket may not be far behind.
Traders are pushing prices higher amid concerns that supplies from the world’s biggest producer, Brazil, could shrink significantly. Hot, dry
weather in the country may have stunted the crucial early stages of the beans’ development. And hopes for a big rainfall over the weekend were
dashed, leaving trees still parched.
It can take months for fluctuations in the $9.3 billion coffee-futures market to trickle down to consumers. Many roasters buy beans months in
advance, allowing them to weather short-term increases in the futures market. But the magnitude of this year’s rally is so great that some
roasters and coffee shops will need to raise prices in the next few weeks, some analysts said.
Joseph Fernandes III, vice president at Socafe, a coffee roaster and trader in Newark, N.J., said if futures prices remain at current levels for the
next 15 to 30 days, he would “consider having to reflect that in my retail price.”
Coffee prices posted the biggest one-day gain in almost a decade Tuesday. Hot, dry weather in Brazil
has interfered with the development of coffee cherries, the fruit that surrounds the seeds that are
harvested and roasted as coffee beans. A worker places packages of coffee onto a pallet last week
before shipping them from a facility in Brazil. Bloomberg News
By ALEXANDRA WEXLER
As Coffee Soars, That Cup of Joe May Get Pricier – WSJ.com 2/19/14, 1:26 AM
http://online.wsj.com/news/articles/SB10001424052702304899704579390731427127724#printMode Page 2 of 2
“Luckily, we bought most of our coffee when prices were lower, and we have reserves,” Mr. Fernandes said. “It’s just a matter of watching and
waiting at this point” to see if prices stay elevated.
The volatility in the futures market presents a challenge to roasters like Mr. Fernandes because it makes it difficult to predict what beans will cost
when it is time to make another purchase. Arabica beans are typically used in gourmet blends and prized for their mild flavor.
Coffee drinkers won’t see an immediate big increase in the cost of a cup. Higher prices are going to be seen in retail cans and bags of coffee first.
Beans make up a smaller share of the price in coffee shops.
“Supplies aren’t going to be totally depleted just yet,” and coffee companies are used to volatility in the price of their most-important ingredient,
said Dana LaMendola, beverage analyst at market-research firm Euromonitor International.
For investors, coffee’s rally presents a potentially lucrative, if risky, opportunity. Many are betting that prices will rise further, though it has been a
bumpy ride. This is the seventh session this year that arabica futures have moved at least 4% or more; six of those moves were gains. At this
point in 2013, there had been one such move.
The week ended Feb. 4 was the first time since July 2012 that money managers held more net bets that coffee prices would rise than fall,
according to the Commodity Futures Trading Commission.
Shawn Hackett, president of brokerage and consulting firm Hackett Financial Advisors in Boynton Beach, Fla., said he placed futures and options
bets on higher coffee prices throughout January. He predicts arabica prices will rise to $2 a pound in the next few weeks. Futures haven’t traded
above that level since March 2012.
The success of bets like Mr. Hackett’s likely depends on crop reports out of Brazil heading into the harvest season, which begins in May.
The dry spell has many traders and investors reducing their coffee forecasts as they worry about production losses in Brazil, the source of onethird
of the world’s coffee.
In November, many analysts had predicted Brazil’s crop would set a record for a third consecutive year. Now, some analysts and investors say
global production could fall short of demand this season.
However, rain in coming days and weeks could still reduce the overall damage to this year’s crop, analysts said. “I still feel like everyone’s just
running in, and when it finally falls, it will fall hard,” said Hector Galvan, senior market strategist at brokerage RJO Futures in Chicago. “It would
be hard for me to think we’re taking coffee to $2 over the next month without having concrete news” on what the damage has been in Brazil.
Growers are likely to begin evaluating how much damage has been done at the end of this month, when the coffee cherries are more developed.
The cherries could be smaller than usual, or they could fall from the trees prematurely due to the lack of moisture, analysts said.
The weather outlook for Brazil’s coffee regions calls for continued above-normal temperatures and limited rainfall for the next five days, according
to forecaster DTN.
“We have to expect to see a lot of volatility [in coffee prices] in the next week or so” until more is known about the crop damage, said Hernando
de la Roche, senior vice president at financial-services firm INTL FCStone in Miami.
February 19, 2014
Coffee jumps 10% on fund buying
February 18, 2014 12:46 pm
Coffee jumps 10% on fund buying By Emiko Terazono
Coffee prices jumped 10 per cent on Tuesday to a year high on heavy buying by hedge funds and other financial investors. The higher quality arabica bean rallied sharply on active buying, with the ICE May benchmark hitting a high of $1.5665 a pound, the highest level since January 2013. The buying came in spite of rains in Brazil, the world’s largest producer of coffee, with forecasts of more rain to come. Dry and hot weather in January had triggered buying last month, and the benchmark has risen almost 35 per cent since the start of the year. “Coffee was the favourite short of the last 2 years and now it’s the favourite long,” said Kona Haque, analyst at Macquarie in London. The potential fall in the Brazilian harvest underpinned the bullish view for coffee. According to the International Coffee Organization, Brazilian coffee production for the 2014/15 harvest year is estimated to total between 46.53m and 50.15m 60kg bags. This would mean two consecutive years of declining Brazilian output for the first time since 1977, caused by a fall in the area of production and investment due to lower coffee prices. Output in Central America has also been hit by la roya, the leaf rust which affects coffee plants. Nevertheless, coffee specialists point to plentiful production from Colombia, the top producers of premium ‘washed’ mild arabica. The country produced more than 11m bags in the 12 months to January, up 35 per cent from a year before. “The current prices are telling us that there isn’t enough arabica in the world, but not a lot of people think that’s the case,” said one analyst.
February 06, 2014
Brazil coffee area ‘getting drier and drier’ – ICO
Brazil’s coffee areas are “just becoming drier and drier”, International Coffee Organization executive Mauricio Galindo said as the group unveiled a below-market forecast for world output, and futures soared a further 4%.
“It is true that Brazil is just becoming drier and drier,” Mr Galindo, ICO head of operations, told Agrimoney.com.
While Espirito Santo, the major area for growing robusta beans, had “extensive irrigation” to protect trees from the lack of moisture, this was “not so” in Minas Gerais, the main state for growing the arabica beans of which Brazil is the top producer.
Frost vs drought
This presented an irony for an industry which has moved largely north from states such as Parana to escape freezes which proved particularly severe in 1994 and in 1976, when a Brazilian cold snap sent arabica futures to the record high of 337.5 cents a pound which still stands.
“Farmers moved north to escape frost and now have drought,” Mr Galindo said.
Separately, data from consultancy Somar confirmed the dry start to February for Brazil’s coffee belt, with only the Cacoal region of Rondonia receiving any rain at all so far.
Somar forecast further dry weather for at least the next two weeks, as a high pressure ridge keeps cold fronts, and moisture chances, at bay.
Mr Galindo’s comments came as the ICO, in its first forecast for 2013-14, estimated a rise of only 659,000 bags to 145.78m bags in world output, a figure far smaller than that seen by many other commentators.
Indeed, it implies only a small production surplus, assuming that consumption continues its long-term growth of 2.4% a year on ICO measures.
Macquarie has forecast a 3.3m-bag rise to 150.7m bags in world output in 2013-14, with Rabobank estimating the increase at 1.9m bags to 150.6m bags, and Societe Generale pegging production 147.5m bags, albeit down on that the previous season.
The ICO figure – which incorporates last year’s Brazilian harvest, rather than the 2014 crop threatened by drought – includes a 7.2% rise to 60.34m bags in output of robusta coffee, supported by a 25% jump to a record 27.5m bags in output from Vietnam, the top producer of the beans.
However, production of arabica beans will turn out 3.8% down, at 85.44m bags, depressed in particular by the outbreak of the roya rust fungus in Mexico and Central America, whose combined coffee production is seen falling 13.5%.
Colombia vs Central America
This decline has been reflected in prices too, with values of the mild beans grown in Central America appreciating by 5.4% last month.
That saw them nearly overtake prices of Colombian milds, closing a discount which stood at 7.0% discount a year before, and reflecting the recovery in Colombian coffee output after a tree replanting programme, with varieties resistant to rust.
Separate data, from Colombia’s national coffee growers’ federation, showed domestic coffee production reaching 1.01m bags last month, up 15% year on year, and the best January figure since 2007.
‘Detrimental to development’
However, prices of Brazilian natural beans rose most last month, by 6.2%, the ICO said, highlighted the “speculation over the size of the upcoming Brazilian crop”.
“Particularly dry weather in January in several coffee‐growing regions in Brazil has been seen as detrimental to the development of the 2014-15 harvest, supporting coffee prices over the course of the month.”
A fall in Brazilian coffee output in 2014 would represent the first time since 1977 that the country has recorded two successive years of production declines, the ICO said.
Arabica coffee futures for March stood 4.8% higher at 142.85 cents a pound in late deals in New York, having touched 145.70 cents a pound earlier, the highest for a spot contract since May last year.
Robusta coffee for March stood up 2.6% at $1,856 a tonne.
January 14, 2014
KENYA COFFEE SECTOR THREATENED BY UPHEAVAL IN INTERNAL MARKETING
To our esteemed clients,
In the last few days there has been an escalation of coffee politics in Nyeri County, home to some of the best coffees in Kenya.
Licensed coffee millers and marketing agents are being forced out of the area, as the newly elected Nyeri county government tries to seize the marketing rights of the crop.
Politically, this is being sold to farmers as a way to control coffee sales and demand higher prices.
Previous attempts to centralise the sale of cooperative coffee in Kenya have usually ended in failure as farmers end up subsidising expensive monopolies (eg KPCU in the past)
Traders now fear there could be disruption to the flow of coffee at the auction, as well as a loss of traceability, leading to de-certification of many supply chains.
Similar, though less aggressive, tactics are being used in Meru and Muranga. Other counties are trying to impose their own taxes on the movement and sale of coffee.
We worry that the strong-arm tactics being adopted in Nyeri will spread to other coffee producing areas, if successful.
The policies being adopted by the newly created county governments – power has only recently been devolved from Central Government in mid 2013 – are at odds with a national policy of liberalisation.
However, the Central Government is yet to intervene to protect the rights of investors or to clarify any limits on policy making at a regional level.
As an active player in the Kenya market, ECOM is working closely with other members of the Coffee Millers & Marketers Association and the Kenya Coffee Trade Association to try and establish a dialogue with the Coffee Board of Kenya, and it’s parent Ministry (of Agriculture).
Given the threat which currently exists to our infrastructure and supply chains, we have decided to circulate this email by way of engaging the wider coffee community and keeping our clients updated.
In case you have any questions regarding the above, please don’t hesitate to contact us and we will put you in touch with Justin Archer, who is the director of ECOM’s East Africa origin operations.
December 20, 2013
Room for improvement…
Scientists have come upon two magic words capable of making consumers believe a plain old cup of coffee tastes better and should be more expensive: “eco-friendly.”
In a series of experiments, researchers asked people to sample two identical cups of coffee brewed from the same batch of arabica beans using a “standard model coffee machine,” according to a report published Wednesday by the journal PLOS ONE. The researchers told the study volunteers that one of the cups was made with “eco-friendly” coffee beans and the other was not. Over and over, people who said they cared about the environment gave the “eco-friendly” coffee higher marks.
“With the right convictions, an ‘eco-friendly’ label is sufficient for a product to taste better than a non-labeled objectively identical alternative,” they wrote (italics are theirs).
The research team used a questionnaire to assess the value volunteers placed on recycling, sustainability and other environmentally themed activities. (Sample question: “Do you feel guilt when you buy non-eco-friendly alternatives?”) The responses were used to sort coffee-tasters into “high sustainability” and “low sustainability” groups.
In the first experiment, 74% of the high sustainability consumers said they preferred the “eco-friendly” coffee to the “not-eco-friendly” alternative and gave it higher ratings for taste. They also were willing to pay about 25% more for it. Meanwhile, the low sustainability volunteers were basically split between the two options and weren’t willing to pay extra for the goodie-goodie joe.
In the next experiment, volunteers were not told which cup of coffee was “eco-friendly” until after they had tasted both samples. In that case, the label didn’t influence their ratings for taste. However, high sustainability volunteers were still willing to pay more for the “eco-friendly” coffee even when they were told their preferred cup of coffee was of the “not-eco-friendly” variety.
“This finding indicates that their willingness to pay a premium for eco-friendly alternatives is – at least in part – based on altruistic (e.g., for the sake of the environment) rather than on more self-serving reasons (e.g., biased taste preferences),” according to the study.
But were they really being altruistic, or were they merely acting altruistic because they wanted to impress the researchers? To find out, the team conducted a third experiment.
This time, researchers told volunteers which coffee was “eco-friendly” and which one wasn’t before they took their first sip. Then, some volunteers reported their taste and price preferences directly to a researcher, while others were asked to write down their answers and leave them in a sealed box. If volunteers were motivated by peer pressure, those who gave their feedback in person would give the “eco-friendly” coffee higher ratings than those who gave their feedback anonymously.
But that’s not what happened. “Social desirability did not influence the eco-label effect on taste,” the researchers wrote.
This isn’t the first time scientists have demonstrated that lying to people about a product’s characteristics can influence how much they think they like it. For instance, in a study from the Cornell University Food and Brand Lab, volunteers thought nutrition bars tasted worse when they were told that one of the ingredients was soy, even though it wasn’t. In another study by scientists from Caltech and Stanford, volunteers gave higher taste ratings to wine that they thought was more expensive.
So it looks like Juliet was wrong when she told Romeo that “a rose by any other name would smell as sweet.” An “eco-friendly” rose would smell sweeter.
December 20, 2013
Coffee for energy, fuel and a cleaner world
Coffee fuels millions of people’s mornings, but like other fuels it also comes with its own unique environmental issues. Coffee is one of the globe’s largest agricultural commodities, with about 8bn kilograms (more than 16bn lbs) grown annually worldwide. That’s a lot of coffee – and a lot of leftover coffee grounds, most of which ends up in landfills or, in a best-case scenario, as a soil conditioner in someone’s garden.
Many people seem to like the idea of turning something they throw out daily into a useful commodity. Companies such as Starbucks and Nestle, for example, are already putting used coffee grounds to work, while researchers believe that oil from coffee grounds could end up contributing tens of millions of liters of biodiesel to the global fuel supply.
Detergents, bioplastics and energy
Starbucks, which purchases nearly 400m pounds of coffee annually, is working to convert the grounds – along with bakery food waste – into laundry detergents, bioplastics and other products.
And food giant Nestlé, which has been incinerating coffee for energy for decades, is now also using it as a heat source to cook food products at 22 of its 28 coffee factories.
The idea of using coffee for energy beyond the morning buzz was “driven by the insight that coffee grounds have a fairly high calorific value”, says Claus Conzelmann, vice-president for safety, health and environmental sustainability at Nestlé. “In fact their fuel value is even slightly better than wood.”
Coffee grounds fulfill 100% of the “actual energy needs” at two of the company’s newest coffee factories, which opened this year in Vietnam and China, he says.
The company’s reuse of coffee should help the company reach its recently announced goal of zero waste at its 150 European factories by 2020. Incineration has kept some 800,000 tons of coffee grounds out of landfills each year, and also has helped Nestlé halve its carbon emissions per ton of product – and reduce its absolute energy usage by approximately 5% as production has grown more than 60%.
Meanwhile, a trio of scientists at the University of Cincinnati has been studying coffee grounds as a potential feedstock for biodiesel. The researchers found that used coffee grounds – which they collected from an on-campus Starbucks store – are 11% to 20% oil, by weight – roughly the same amount as palm oil, soybean oil and some other biodiesel feedstocks.
Biodiesel made from used coffee grounds would also help reduce waste – and potentially could help ease concerns about biofuels competing with the food supply. And coffee grounds are both plentiful and widely available, as well as “so cheap they’re almost free” says Mingming Lu, an associate professor of environmental engineering at the University of Cincinnati involved in the research.
But turning coffee into biodiesel presents some additional challenges compared to the other feedstocks.
For one thing, the oil in coffee grounds is solid, not liquid. “The other oils, they are oils,” she says. “The ‘oil’ we’re extracting from … the coffee grounds, it might not be in oil form yet, since they are all solids, they are not liquid yet. But through the extractions, we are able to get this oil as well as convert it. So it becomes what we call a biodiesel precursor.”
Additional steps to extract and convert coffee oils into biofuel could result in higher cost, although Lu hopes the low cost of the grounds could offset production costs.
Preliminary results from the research also found that the oil extracted from the coffee grounds also meets the ASTM International D6751 standards for biodiesel fuel blends, which means it could be used for most biodiesel applications. It also has the potential to be cleaner-burning, according to the results.
Java-based air and water filters
Along with extracting oil from the grounds, the group also studied the possibility of converting the coffee grounds into activated carbon, which is used to filter and remove pollutants from air and water, as well as burning the leftover biomass as an alternative energy source, Lu says.
Students at her university’s business school are writing business cases, attending competitions and promoting the commercial potential of coffee grounds in the hopes of getting a patent and eventually creating an industry, she adds.
“When I talk to people about this idea, most people get excited to be able to use the waste coffee grounds, instead of throwing it away,” she says, “to find a good use for it. So that’s motivating enough for us to continue this research.”