Welcome to the July 2022 edition of DRWakefield’s Monthly Coffee Origin Focus.
July has been a politically turbulent month here in the UK. Our, now former, Prime Minister Boris Johnson resigned on 7 July after months of scandals and uncertainty. Since then, the question of who will take over has dominated much of the news. Down to two candidates, Rishi Sunak and Liz Truss, we now must wait until September to know the final result.
July was a fantastic month for women’s football, as the Women’s Euros took place in England, culminating in an exciting final between England and Germany at Wembley Stadium. The lionesses won the final, bringing home their first major silverware and England’s first since 1966.
At the start of July, Sterling was sitting at 1 GBP to 1.21 USD, a rate now considered ‘fairly strong!’. It hit a low of 1 GBP to 1.17 USD, trumping last month’s low of 1.19 to make it the lowest rate since March 2020. However, Sterling did regain some ground over the second half of the month, closing out at 1 GBP to 1.22 USD.
In this report, we will delve deeper into El Salvador, Kenya and Brazil.
Coffee Origin Focus
The 22/23 crop for El Salvador is looking promising. It is predicted to be the largest crop in the last three years, which is music to the coffee industry’s ears after a couple of years of smaller crops. It is currently winter in Central America, and the weather in El Salvador has largely been typical of the season, with heavy rainfall and tropical storms sweeping the country. However, the weather doesn’t look like it is impacting the coffee.
Many producers have begun to invest back into their farms. Something they have been able to do as a result of the high coffee market, as when the market is high, they can get more for their coffee. Like the rest of the world, the cost of fertiliser has shot up in El Salvador, now costing 100% more than in July 2021.
The shortage of shipping containers, which has been causing global chaos for the best part of a year, seemed to be easing off, but from May 2022, the difficulties in securing shipments returned. There is also a lack of labour available for farms in some coffee-growing regions, meaning production has slowed down for those affected.
Kenya is currently experiencing a cold spell and light rains due to a cold front crossing the country, which may interfere with the drying of beans. However, despite this, the volume of coffee in Kenya is looking positive. Almost 15,000 bags were offered at the auction in the last week of July, with close to 17,000 bags expected to be on offer in the first week of August.
The Presidential elections are set to take place on 9 August this year, which may cause some disruption. Historically, elections have often caused disputes throughout the country. We hope this year’s election and the result will be peaceful. No auction will be taking place during that week for this very reason.
The Kenyan Shilling is currently holding stable against the US Dollar, sitting around 1 USD to 118 KES. However, with current inflation levels, interest rates may rise to try and prevent the KES from devaluing further. For context, in July 2021 the exchange rate sat at 1 USD to 108 KES and has been devaluing since. It looks to have tapered off in the last few weeks, but it will likely be affected in the coming election.
At this time of year, the coffee industry’s eyes are on the Brazilian weather forecast, looking out for potential frosts. However, after a serious frost in July 2021, this year’s outlook is much more favourable. At present, the tropical maritime air mass is preventing any cold fronts or polar air mass from approaching Southeast Brazil, the main coffee-growing region, and so protecting it from the threat of frost. The weather is dry and warm with no rain forecast.
In terms of shipping, the difficulties in securing shipments and containers remain. Some shipping lines have suspended part of their operations, making competition for space on vessels even tighter.
The Brazilian Specialty Coffee Association have added a new area on the map of coffee-producing regions this month, the Volcanic Region. Its unique terroir is due to the caldera of an extinct volcano. A caldera is the crater left behind after a volcano erupts and then collapses. This caldera marks an area of volcanic soil between the south of Minas Gerais and the northeast of the state of São Paulo.
Our thanks to our partners JASAL in El Salvador.