Welcome to DR Wakefield’s Monthly Origin Focus, May 2021 Edition.
May the 17th was the date on most people’s minds as the day that further freedoms were granted to the UK population. The majority of venues and public spaces were allowed to reopen and one industry that boomed back was cinemas. International travel still remains a delicate area to tiptoe around, but some people have been able to get away to a few select countries to seek out that spring sunshine.
The premier league played its final games of the season with Manchester City once again clinching the title. Can they also be crowned the Kings of Europe this weekend?
Protests in Colombia continued throughout May as the public stood against a proposed tax reform that would lower the threshold of non-taxable income. Although the bill was quickly withdrawn, demonstrations persisted and quickly turned violent, sparking further riots and disruption in response to the governments tactics to disperse the crowds.
The New York Futures began the month at 140 cts/Ib and has rode the peaks and troughs up, ending just below 160 cts/Ib. The value of the pound also gained nearly 4p on the dollar just resting below 1.42.
This month we delve deeper into Rwanda, Nicaragua, and Bolivia.
Rwanda began its harvest at the end of April, six weeks later than the previous year, so during May operations ramped up somewhat. Volume is looking to match or exceed last year, which in itself, was a great success by all accounts. As the bags of cherries keep rolling in, the weather for the upcoming weeks looks promising for drying too, lots of sun, no rain, and stable temperatures between 24-27OC. The harvest is expected to reach its peak in June or July before dipping off slightly and coming back in August. The harvest in Rwanda as a whole is positioned in such a way that it doesn’t follow the storyline of a separate fly and main crop like its other East African counterparts, but rather has a rolling picking season that lasts for almost the entire year. This is due to the climate and variation of altitudes where the coffee trees are grown, from 1,400 to 2,500 m.a.s.l. Farmers in the foothills start off the year and as the months draw on, cherries situated higher up begin to ripen. Just as the higher altitude coffees come to a close, those on the lower slopes are beginning once again.
This year’s volume expectations for commercial grades sit around 10% lower than previous years. The reasons for this include both wet weather conditions putting pressure on lower-lying farmers, giving the cherries less time to ripen, and increasing the amount of defected beans, as well as smallholder farmers making a move to produce speciality grades to try and actualise a larger return per kilo. This reduced volume of commercial grades is causing coffee prices to rise. Combined with a steady inflation rate in Rwanda, (the Rwandan Franc is currently sitting around 1000 to the US dollar, a significant change from this time in 2016 when it hovered around the 750 mark) coffee production is a good source of income for many smallholder farmers. The Rwandan government are promoting coffee growing and are offering training sessions on harvesting and floating the cherries, amongst other best practices in a bid improve volume and quality.
The passage of hurricanes ETA and IOTA through Central America continue to have effects on Nicaraguan coffee exports. According to data from the Association of Coffee Exporters (Excan) in the first four months of the year Nicaragua exported a total of 1.16 million 60kg bags, 306,000 bags less than the same period in 2020. The value of these total exports equates to 197 million US dollars, 7% less than in 2020, despite the fact that international prices have increased by 9% compared to the average price of last year. Multinational companies have made up 65% of the coffee export market share and 83% of exports have been SHG grade.
An estimated volume reduction of 20% for the current harvest corresponds to between 10-12% as a result of the hurricanes and 8-10% because of lower fertilization rates. A factor impacting lower coffee exports figures is the limited availability of containers and the continuous rollover of cargoes from one month to the next, which is delaying delivery times by roughly 10%. This is also a reason why the internal differentials are not coming down. However, the situation is expected to improve in July.
The aftermath generated by the political crisis that occurred in 2018 continues to affect the financial system and the financing of coffee producers. Many of the growers have had to look for alternative sources of finance in order to be able to continue the harvest.
The vast majority of coffee in Bolivia is produced in the Yungas areas. Many of the large landowners have had their farms expropriated by various governmental reforms and handed back to rural farming families – meaning many smallholder farms produce 95% of Bolivia’s coffee. Either intentionally or not, much of the coffee grown is organic. High altitude, fertile soils and constant rainfall throughout the year make Bolivia an ideal location for growing. However, a lack of investment in infrastructure does pose logistical problems for exports.
Bolivia exported 30,000 bags last year and this year is set to improve on that number. The increase has been attributed to a successful revival of coffee plantations as well as new plantations increasing their production. Moreover, the weather in Bolivia and particularly the Caravani region, has been good, with no excessive rain or frosts that often hamper the growing. As an example our suppliers Union Pro Agro are hoping to increase their exports by 50% from the previous year.
The exchange rate between the US dollar and Boliviano for the most part remains very stable and has done since the beginning of 2019, sitting just below 7 Boliviano to 1 dollar. This is one aspect that reduces price volatility for the producers. Farmgate prices are largely influenced by the region where the coffee is produced.
Our thanks to Jacquie Turner and Malcom Clear from Kinini, Victor from Finca Las Nubes and Connie Kolosvary from Optco for their input this month.