Welcome to the 2021 end-of-year edition of the DRWakefield Coffee Origin Focus.
2021 has been another rollercoaster of a year from start to finish. The UK began 2021 going into its third, and promised final, lockdown, and Covid-19 dominated headlines across the world throughout the year, ending with the emergence of the Omicron variant meaning many countries now face restrictions and lockdowns.
The coffee world has also been turbulent this year and marked by extreme weather. For much of the first half of 2021, Central America was still recovering from hurricanes Eta and Iota, and the Brazilian frost in July triggered the coffee market to hit highs many of us in the industry had never seen before.
Keep reading for a whistle-stop tour of some of our origins and news stories from throughout the year!
Kicking off the year, in January the main news coming out of India was the suspension of three recently enacted agricultural laws. Thanks to a strike involving over 250 million farmers (what was said to be the world’s largest-ever strike), the policies published by the Supreme Court in 2020 were put on hold. In an attempt to advance the countries agricultural industry, which employs nearly half of the population, the Supreme Court introduced three reforms aiming to accelerate growth through private investment to aid smallholder farmers. However, aggrieved farmers believe they were not consulted and, in fact, the laws could negatively impact them. In November 2021, these laws were officially repealed, but the unionised farmers are still pushing for the introduction of minimum support prices.
February began with the distressing news that a military coup had overthrown Myanmar’s democratically elected government. The new military rule declared a one year state of emergency and went about disrupting internet signals, blocking roads and replacing several ministers. Opposition to the coup d’etat started peacefully but, as many predicted, was escalated by the military, and the army began using violent tactics to disperse crowds. Internationally the coup has been condemned. This contentious issue presses into 2022, with many civilian killings in recent months. We are hoping for the next arrivals of coffee from Myanmar to arrive in February 2022.
In March, Costa Rica’s harvest started roughly a month behind its usual cycle due to the hurricanes Eta and Iota hitting Central America at the end of 2020. That being said, 95% of the harvest was quickly reported to ICAFE, Costa Rica’s governing coffee body, and most of the crop was sold forward. The total production volume reached 1.472 million 60kg bags with the expectation this will rise to 1.485 million 60kg bags in the 2021/22 crop. Worries that Covid-19 would impact the harvest were put to rest as social distancing measures enabled pickers and processers to proceed largely unimpeded. The number of Covid cases has dropped considerably, and the country has slowly returned to normal. The country also embarked on its vaccination program with over a quarter of million doses already administered by March, representing nearly 5% of the country. Costa Rica had hoped to vaccinate 80% of its adult population by the end of 2021. The actual figure sits a bit below, at 68%, but is still a considerable achievement.
In April, we wrote about how the Colombian Peso had gained much of the value it had lost on the US dollar in 2020. In March 2020, one dollar was worth over 4,100 Pesos, and in March 2021, it stood a little above 3,500 Pesos. Since then, it has swung back the other way and now stands at just over 4,000 Pesos. The Colombian Peso has always been a volatile currency. In previous periods of low value, there have been calls for the Colombian government to replace it with the US dollar, like some of its other Latin American counterparts. Whilst the value is increasing, it’s hard to imagine the government would make such a call, but perhaps in the future, that will be one way to secure a bit more stability in the Colombian coffee industry.
We took you to Hawaii in May, not an origin often featured in our monthly reports. It’s one of the only areas of the USA that commercially produces coffee. The 20/21 harvest produced only 2,322 MT, meaning it certainly sits alongside the smaller of the world’s coffee origins.
Kona coffee is therefore often on the expensive side, partly due to the small volumes grown. US law states that a blend only has to contain 10% of Kona coffee to include the name on the packaging, however, some companies have tried to ride off the back of this name, selling a blend of mostly much cheaper coffees with just some Kona coffee as Kona coffee, for what then seems like a bargain price. Hawaiian farmers fought a court case in early 2021 to sue large corporations, including Costco and Walmart, for claiming to be selling Kona coffee for a fraction of the regular price.
On 15th June, the accused corporations agreed to pay a huge $13.1 million settlement to the Kona farmers as compensation for falsely advertising their coffee as Kona. They have also been required to modify their packaging to state ‘Kona blend’ rather than simply ‘Kona coffee’. Whilst this is an important step in protecting the Kona brand, the farmers are still looking to get new laws passed to increase the minimum percentage of Kona to 51%.
The passage of hurricanes Eta and Iota through Central America continued to affect Nicaraguan coffee exports. According to data from the Association of Coffee Exporters (Excan), in the first four months of the year, Nicaragua exported 1.16 million 60kg bags, 306,000 bags less than the same period in 2020. The value of these total exports equated to 197 million US dollars, 7% less than in 2020, even though international prices increased by 9% compared to the previous year’s average price. Multinational companies made up 65% of the coffee export market share, and 83% of exports were SHG grade.
The estimated 20% volume reduction in 2021 corresponds to between 10-12% because of the hurricanes and 8-10% due to lower fertilisation rates. An additional factor impacting lower coffee exports figures was the limited availability of containers and the continuous rollover of cargoes from one month to the next, which delayed delivery times by roughly 10%. This is also a reason why the internal differentials did not come down.
The aftermath generated by the political crisis that occurred in 2018 continued to affect the financial system and the financing of coffee producers. As a result, many of the growers had to look for alternative sources of finance to continue the harvest.
In July, we wrote how the former president of Tanzania passed away in February, allowing the vice president, Samia Suhulu Hassan, to take his position as the head of government. Change is on the horizon, intending to stimulate the economy by improving the business environment. The government are actively trying to promote the coffee industry, which exporters find encouraging, as they are engaged to boost production and quality. Once again, regulators have allowed private players to re-enter the market, buying cherry and parchment directly from the farmers, basically overturning the ban that was imposed two years ago.
After the previous year’s lower harvest, Tanzania enjoyed a slight increase in production in 2021. However, the industry was still actively seeking to boost yields. Tanzanian smallholders are struggling, but many good initiatives were being explored. The current expectation is an ambitious 70,000 tons (over 1 million bags), increasing from the last season’s total of 51,000 tons (850,000 bags). Tanzania has experienced two years of good rains, which will boost estate coffee quality and volumes. However, smallholders will remain relatively flat in terms of quality and volume.
Brazilian weather is carefully monitored throughout the year, swinging from frost risks to drought warnings as the seasons shift. Being by far the world’s largest producer, adverse weather conditions can reduce crop volumes in a single spell by more than some growing countries export on an annual basis. July 2021 was like many others, and cold snaps were forecast. However, when producers went on their daily crop walk on Tuesday 20th, many of them found more severe damage than predicted.
There are varying reports on the frost’s impact. However, bag numbers ranging between two to nine million have been suggested as the possible loss to the 22/23 crop. Sul de minas and Cerrado suffered the worst of the coffee-producing regions.
Part of the reason why frosts are so disruptive in Brazil is due to their growing system compared to other producing nations. Large, expansive, mono-cropped fields allow for high yields when conditions are good, as there are no other plants to compete for sunlight or nutrients, and they also allow for mechanisation. Yet, when growing conditions are less favourable, the lack of intercropped shade trees can lead to over-exposure to sun and drought worries, and there is nothing to help protect from frost. Other countries that grow their trees less intensively and with a more holistic frame of mind reduce potential exposure to such large swings in production.
It is well documented that, as the climate crisis worsens, extreme weather occurrences will only get more frequent. Perhaps this should serve as a prompt that Brazil needs to change their growing system to protect itself and as a responsibility to other players in the coffee market worldwide to limit volatility.
In Ethiopia, the incumbent prime minister, Dr Abiy Ahmed, was sworn in for a second term on 4th October, with a strong mandate to continue leading the country through a turbulent time. The conflict and military intervention in the Tigray region in northern Ethiopia, which began in November 2020, continues. The USA is pushing for a ceasefire and aiding negotiations to resolve the conflict but to no success.
However, it was not all bad news. Whilst extreme and unexpected weather has affected many coffee-producing countries, Ethiopia avoided any adverse weather. On the contrary, it rained heavily across the main coffee-producing regions in the country for three months, meaning the coffee trees were in excellent shape for the upcoming crop! As a result, production is up on the previous year, with an expected increase of 15% volume on the 2020/21 crop.
In October, we wrote about how 2021 has been a turbulent year for Peru, like for much of the world. A general election brought in a new president, Pedro Castillo, and Free Peru’s new party. It was a very tight race, with Castillo winning by a mere 0.13% of the vote and was subsequently accused of electoral fraud by his opposition. Political instability coupled with economic uncertainty weakened the Peruvian Sol against the US Dollar, standing at roughly 4 Sol to 1 US$ as of 29th October.
Peru’s 2021 coffee harvest has been marked by low production, high prices and, of course, the global shortage of containers wreaking havoc with shipments. Since the pandemic, the way coffee is sold changed in Peru. Coffee is now bought directly from producers’ farms, and the producer can sell to whoever offers the best price. This, coupled with low volumes of coffee being produced, has meant prices have risen considerably, resulting in producers receiving more money for their coffee.
The shortage of shipping containers hit Peru particularly hard. The crisis made obtaining a space from a shipping company near impossible. The freight rates have risen hugely, and it isn’t easy to know whether once a container has been booked onto a boat if it will acually get the space. Cancellations and delays have become very common and often only happen a few days before a shipment is scheduled to leave.
In November, coffee producers in Guatemala were facing difficulties in hiring experienced coffee pickers and, worryingly, this happened at the start of the picking season. The National Coffee Association of Guatemala (Anacafe) estimates that 300,000 people are needed to complete the harvest each year, from picking to processing.
The shortage of experienced pickers came about for a multitude of reasons. The start of the pandemic lowered coffee prices, and many pickers either left the country in search of more profitable work or now work picking other crops. The president of Anacafe, Juan Luis Barrios, believes this to be more than an anomaly due to the pandemic and a migratory movement is happening. There is strong competition now for hiring workers with other industries such as sugar harvesting, cardamom picking and construction, which seem more attractive as they are perceived to be better paid. In 2020 many coffee pickers moved to cardamom as cardamom prices rapidly increased whilst coffee was decreasing. However, with higher coffee prices and a larger harvest, these people are needed more than ever.
By December, Papua New Guinea’s coffee season had slowed to a steady pace, and the wet season rains had arrived on time, encouraging a good flowering for the 2022 harvest.
There are, however, two major issues that may affect next year’s crop. Firstly, the Covid Delta variant is sweeping through the country and, with only 3% of the population fully vaccinated, the impact is expected to be significant. The bulk of the population live in the rural areas, which are affected the most by Covid, as health services in these areas are virtually non-existent. This could lead to fewer rural farmers and producers being able to harvest their crops. Secondly, a national election is scheduled for mid-2022 at the height of the coffee harvest period. Elections and politics tend to distract and disrupt people’s everyday activities.
Predictions are that next year’s crop will be similar to this year’s at around 800,000 bags. Internal competition for supply by branch offices of all the major global coffee traders ensures the price is at market level and above. Producers are ensuring they harvest every bean and are even planting more coffee trees to make the most of the high prices and to meet the high demand for PNG coffee.
The PNG central bank holds the US$ rate steady at 0.285c to the Kina, and internal prices have climbed to a current level near PGK14.00/kg DIS, which gives a tremendous boost to the cash economy.
And that’s a wrap on 2021, we all have our fingers crossed for a calmer and healthier 2022!