Welcome to the February monthly DRWakefield Market Report. This month, as well as the usual suspects (NYC, Robusta & Currency) we’re also delving a little deeper into El Salvador, Costa Rica and Kenya. Enjoy!
Prices remain driven by concerns about the size of the crop in Brazil and the other main Arabica coffee producing origins. Brazil is in its ‘off’ year in its biennial cycle (high volume crop interchanging with low volume) which is one of the key factors at play here. Although we have seen a recent dip in the market, prices are expected to adjust and rise again as 2017 progresses and it becomes clear that coffee output in key origins may not be at levels that many have predicted. The Economist Intelligence Unit predicts a 2017 Arabica average at US$1.70/lb. The NYC terminal market is rather favourable at the moment and represents a good buying opportunity, although given the decline in GBP over recent months, this low market is not yielding many benefits for our GBP or EUR buyers.
Demand for soluble coffee and blended soluble coffee (famous ‘3 in 1’ type), which tend to be heavy on the use of Robusta in their blends, is driving up demand for Robusta in Asian markets. Concerns over supply abound, mainly due to disappointing weather conditions in Vietnam, and the low Conilon crop from Brazil. With Vietnamese production expected to remain weak, Robusta prices should remain above 2200 $/mt level for the majority of 2017.
In contrast to the January madness, February was much calmer. The Dollar has strengthened against £ Sterling and the Euro. GBP/USD decreasing modestly throughout the month, finishing February at around 1.242, representing a 1.2% decrease. All talk has been about Brexit, however Scoxit has crept into the narrative and this only increases the uncertainty surrounding Pound Sterling. The Euro fell slightly, with talk dominated by the French Presidential election.
Big origins: Brazil, Colombia & Vietnam:
Production in Colombia is expected to decline by 3-4% in 2016/17 due to recent adverse weather conditions. However, the country is well placed for the future with a high percentage of rust-resistant bushes planted after problems with Roya. Thus, predictions for 2017/18 are that production will recover and increase by 4-5%. From drought to flooding – Vietnam now has rain, albeit too much of it. Flooding now poses additional risk. The damage will be long-lasting with some coffee areas completely ruined and some reservoirs still dry.
The El Salvador harvest starts around November, finishing up in March in the higher altitude areas. Weather has been good save some heavy rain that occurred in December. Heavy rains often pose a threat because they can cause premature dropping of cherries from trees and also cause cherries to split, taking on too much moisture at once. That said, the harvest is winding down right now and reports indicate quality is very good this year. We will soon start to see the first rains in April.
This is the first year we have teamed up with JASAL working exclusively with them on Finca Los Nogales in Apaneca-Ilamatepec. It is a collaborative project where roasters have picked the varietal, process, and plot on the farm. JASAL have just printed the roasters’ logos on the bags and we’re expecting the coffee to arrive early May! Quality reports are very good and Andres, the farmer leading this project, is excited about these different coffees making their way to the UK soon. We have a range of yellow honey, red honey, black honey, natural, washed, soaked and double soaked coffees arriving. Varieties include: Bourbon, Hibrid 4, Sarchimor, HSF, Caturra, Red Catuai & Yellow Catuai.
This has been a particularly poor year for Costa Rica in terms of output, with ICAFE’s revised forecast for this year coming in 15% lower than the 15/16 harvest. This level has not been seen since 14/15 when Costa Rica was badly hit by La Roya fungus. The majority of this fall in output has come from the lower altitude regions being hit with prolonged rains and hurricanes towards the end of 2016. This caused a price jump for the HBs and HGAs and this in turn caused price increases for the SHBs. Many roasters who tended to buy the lower grades have turned to other origins in light of these increases.
Exciting times afoot at Coope Tarrazu with our community lot project. This year we are working with the San Antonio Community, who will be producing both natural, washed, and honey processed coffee. Santiago was out there a few weeks ago tasting these delights and we expect to see the pre shipment samples soon. Always a delight to cup! Unfortunately, Tarrazu has been one of the worst affected regions in terms of volume of coffee produced however; mainly due to the fact that 15/16 was a particular bumper harvest for the region. Despite the low output, quality remains top notch so no worries on that front.
Weather has not been favourable over the last few months and has been much dryer than usual. The lack of rains have caused tensions in the northern regions, with nomadic herders clashing (in some case with deadly consequences) with landowners over grazing rights. People are anxiously awaiting the ‘long rains’ which tend to start end of March, beginning of April. Prices surged in February due to reduced supply coming through the auction but have since eased somewhat as lower grade coffees start to come through – Undergrades and some of the Miscellaneous catalogues. Premium lots are still reaching lofty heights, the highest of which in this week’s auction saw over 700 usd/50kg paid for a PB from Nyeri with the highest AA fetching 523 usd/50kg ex-auction. Volumes are expected to remain stable till the middle of April with good quality coffee expected to continue coming through the auction.
This is the first year we have packed special Kenyan lots in Vacuum boxes and we’re excited to announce that we have coffee from Rugeju & Amakui Coffee Factories packed in 30kg Vacuum boxes sitting in the warehouse in the UK! Both factories have a biennial production cycle with the early harvest being from May-June and the late second season being from November-December.
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