Welcome to the January 2022 edition of DRWakefield’s Monthly Origin Focus.
The New Year is well underway as we enter February, and many of us have already given up on our New Year’s resolutions! Here in the UK, the Omicron variant appears to be in the rearview mirror, with restrictions continuing to lift, whilst many other countries face stricter measures and even lockdowns.
In the UK, the days are beginning to get longer as Winter is coming to an end and Spring is on its way, something we can look forward to regardless of what Covid may throw at us in the future!
Sterling rallied against the US $ throughout January as Omicron restrictions eased and fears lessened, peaking at 1 GBP to 1.37 US $, before dropping off slightly, closing the months at 1 to 1.34.
In this report, we will delve deeper into Myanmar, Honduras, and Colombia.
Coffee Origin Focus
This time last year, we were sad to report the distressing news that a military coup had overthrown Myanmar’s democratically elected government. One year on we are relieved to report that the country has become more stable. However, the situation is by no means over. There is still ongoing fighting in some regions, but thankfully, the state of play in the cities appears to be much calmer than last year.
Turning to coffee in Myanmar, the harvest began in December and will continue until April. Production is currently estimated to be about 10% higher than last year due to favourable weather. Heavy and regular rainfall throughout the coffee-growing regions meant that the crop developed well, and production is up despite some estates and farms suffering from the effects of coffee white-stem borers. These are beetles that lay their larvae inside the stem of coffee plants, causing structural damage. They are largely found in coffee grown in and around the Indian peninsula.
This year the coffee market in Myanmar has been quite unstable due to higher demand from its neighbours, such as Thailand and China. This has made competition for sourcing coffee cherries within Myanmar very high and has raised local coffee prices.
Unusually there is no past crop left in Myanmar, and the shortage of containers has continued to cause problems with shipping coffee on time. Multinational buyers, however, continue to buy Myanmar coffee, and demand continues to increase year on year. Here at DRWakefield, we are eagerly awaiting the arrival of some shipments of Myanmar coffee.
The Myanmar Kyat has continued to weaken against the US $ since last year. Currently, the exchange rate is hovering between 1750-1780 Kyat to 1 US $.
Honduras rounded off 2021 with a general election that made history, electing Xiomara Castro, the country’s first-ever female president! However, Castro doesn’t have an easy job on her hands. It has been a difficult time for coffee-growing regions in the country. As we know, coffee prices have been hitting record highs globally, but in Honduras, the cost of production is also sky high. The shipping and logistics crisis has caused production costs to double or even triple in some instances. This, coupled with the economic downturn brought about by the Covid-19 pandemic, has meant more Hondurans are considering emigrating to the USA. It is now up to Castro to try to dissuade Honduran people from making this journey by improving prospects in their home country. This has already resulted in wages increasing for some coffee producers, which, in turn, further increases the price of coffee. For now, this seems to be working, but fears are cropping up over how long the New York Coffee Market will remain so high. If it falls and pushes the price of coffee down, there are questions over what will happen if the cost of production doesn’t fall with it.
The coffee harvest in Honduras is well underway, and volumes are looking very positive. Currently, the total volume of coffee sold and exported is roughly 40% higher than the volume from this time last year.
The Honduran lempira has continued to slowly devalue against the US $. Currently, the exchange rate stands at 24.6 Lempira to 1 US $.
The year has kicked off in Colombia with a lot of political uncertainty as the general elections will be held in 2022. Currently, the population appears to be behind the left-wing candidate, favouring the left since strikes in March 2021. Recent leftist victories in Peru and Chile add to the feeling that the left-wing candidate will win in Colombia too.
As with the rest of the coffee world, Colombia has faced difficulties in shipping coffee. However, on top of the shortage of containers, police inspections are also causing delays. Previously these inspections would be carried out on randomly selected containers, however now every container is inspected. This is causing further delays at the ports, with some shipments losing their bookings as a result.
In December 2021, the FNC published an article stating that production was down 21% on the same month in 2020. This shortage pushed up the internal price of coffee, which was already high due to the high New York Coffee Market. Many producers and cooperatives confirm lower volumes, some even lower than the FNC’s numbers.
Despite this, our partners at Café Granja La Esperanza are estimating their harvests to have very similar volumes to last year, with their second harvest, between October and December, expected to be even bigger than last year’s.
The Colombian peso has weakened against the US $. This has happened for several reasons, namely the political uncertainty approaching the general elections and the impact of the Omicron variant. Currently, 1 US $ is worth 3,963 pesos.