The month of February started off seeing Deontay Wilder and Tyson Fury agree to a rematch in the boxing ring after their headline-grabbing first face off, and it ended with a similar attention-grabbing second summit between Trump and Kim in Hanoi. No real knockouts there, though the market price in coffee took a tumble as we will look into, as well as a quick overview of El Salvador, Honduras and Nicaragua.
February opened its account trading at just over 106.00 c/lb with the highest of the day at 107.00 c/lb. This day high also proved to be the month high. As you can see from the graph above, there was a bearish trend for the whole month, and it closed at 95.30c/lb. On 26th of February the market reached 93.50 c/lb, a level not hit since last September 2018, and before that, not hit since December 2005. To conclude, February saw a pretty stable down trend, with an average 2 c/lb daily trading range.
The London market opened the month at just below 1550 $/mt. With Robusta origins holding back sales due to the low market, activity was low during the month. However, there was a big one-day rally at the beginning of the month when it nearly touched 1600 $/mt. We finished February at a close of 1520 $/mt.
Pound Sterling started the month strong against both the Euro and US Dollar. It lost value against both these currencies for the first two weeks of the month. However, there was a post Valentine’s day revival, with Pound Sterling gaining in value and finishing the month with GBP/EUR (purple line) at 1.1637 and GBP/USD (orange line) at 1.3230. So it can be observed that that Pound Sterling got stronger and stronger as we approached the 29th of March Brexit deadline.
Big origins: Brazil, Colombia & Vietnam
Brazilian green coffee exports were 3.142 million 60kg bags, 40.5% higher than the same period in 2018 according to a statement from industry group Cecafe. They highlighted investments in research and technology as the key drivers behind this surge.
The Colombian Coffee Growers Federation (FNC) announced that Colombian coffee might stop trading against the New York Coffee Market, as current levels do not reflect the actual reality. The FNC CEO said: “At these price levels, our coffee farming is not sustainable”.
It appears that the Vietnamese are holding their sales back for now as the London market is quite low. This is common practice for farmers in Vietnam when the Robusta market is low.
For the majority of growing regions in El Salvador, the harvest finished in the last week of February/first week of March. Volume is significantly down on last year, but the quality is good. This crop is in the off year in the biennial cycle, so no surprise on the fall in output.
Between 45-55% of the country’s production still comes from the Apaneca region in the western part of the country. Bourbon and Pacas remain the key varietals in the country, but numerous farmers are diversifying with others. The Urrutia family, who we source Finca San Ernesto and Finca el Ingenio from, are experimenting with a rust-resistant varietal called San Pancho. Many people cherish El Salvadorian coffee for its Bourbons so it will be interesting to see how this diversification affects demand for El Salvadorian coffee. Certainly, with low yields and la roya still a problem, diversification is essential. If you hop across the border to Ocotepeque, western Honduras, yields are up to three or four times higher!
JASAL, in Apaneca, are currently processing our micro lots for the container arriving this June. In the container are Project Los Nogales, and a few other tasty numbers. Raul, the head cupper there, has been very busy with this crop. The harvest started late and finished early! Keep your eyes peeled for the arrival of the fruits of their work.
Like their neighbours in El Salvador, Honduras coffee producers also started harvesting later than expected. Many shipments of lower altitude coffee scheduled for November and December ended up shipping in January and February, which caused a gridlock at the port. Generally speaking, most contracts are three weeks behind schedule as a result. The coffee has been harvested, it’s the lack of mill capacity which is an issue. Although the harvest started late, the first six weeks of the year saw a vast amount of cherry picked; warehouses are full.
This year looks set to be another big year in terms of production. However, everyone is talking about next year. With the persistently low coffee market, many farmers are leaving cherries on trees and not maintaining their farms. Often the price farmers are getting is below cost of production, and this is the result. Quality will certainly be an issue for the 2019/20 harvest.
Most of the country had harvested around 70% of their crop by mid-February. Nicaraguans started harvesting coffee one month later than expected – a trend we have seen all across Central America! The weather was sunny and dry across the month, which created the perfect conditions for drying coffee-something which is not a given with the changing climate! Quality is good this year, and our cupping team have been impressed with the pre-shipment samples received for the microlots we are sourcing.
Producers are suffering with the low coffee market, and local banks are not offering any help with finance. Like in Honduras, many are leaving their farms, and this will result in a decrease in production for the 2019/20 crop. Everyone is crossing their fingers and hoping this bearish market will reverse its trend.