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March Coffee Origin Focus: Indonesia, El Salvador and Colombia

Welcome to another edition of DRWakefield’s monthly origin focus. At the time of writing, we’ve just had a gloriously sunny bank holiday weekend here in the UK and things are finally looking up. In the west, much of March news was dominated by the collapse of both Silicon Valley Bank in the States, and shortly after Credit Suisse in Switzerland. The sterling has been making steady ground on the dollar since mid-March, although judging by the dollar index this may be more a case of the dollar loosing steady ground against the pound!

This month we will be delving into Indonesia, El Salvador and Colombia.

Coffee Origin Focus

Indonesia:

Coffee prices from Indonesia remain high as demand continues to outstrip supply. Back in 2020 when coffee prices were low, a lot of smallholder farmers cut down their coffee trees in favour of, what was then, more profitable crops. In the last few years, we have begun to see the effect of this in crop volumes coming out of Indonesia, and we may not return to 2020 levels until new farm trees have matured. Hopefully, these will be existing farms returning to growing coffee as there have been cases of deforestation in Indonesia to create farmland for coffee.

Demand from the internal market, as well as new emerging markets have further increased the FOB prices in Indonesia. Figures from the 2022 cost of production study by the Fairtrade Foundation show that the current FOB price in Indonesia is almost double the cost of production. Relative to other origins this is one of the highest differences and highlights the demand for Indonesian coffee.

El Salvador:

Jack and MT visited El Salvador at the end of March and have passed on their feedback. The harvest is almost finished even at the highest altitudes and the crop is good in size and quality. The bulk of the harvest was completed in January and February. The country also received its first rains in late March in very localised areas prompting some initial flowering. The picture below is a nice example of well-set flowers at El Padre, a plot at El Molino farm, owned by Jasal.

There is a very slight concern that rains are patchy and elongated, but it is too early in the season to draw conclusions. As things stand, next year’s crop is also expected to be strong in volume and quality. Weather has also been good for drying coffee, with very few occasions of unforecasted rains. This should once again reduce quality issues as coffee lands. DRWakefield took delivery of their first SHG coffee from the San Ernesto farm last week. The one negative sentiment that pickers and seasonal coffee staff are concerned about are that people continue to leave the country for the USA, drastically impacting the available and financially viable workforce for coffee. If this problem persists as expected, expect diffs to continue to climb over the years ahead.

Colombia:

Current volumes in Colombia remain low following a fly crop which was 7% down on last year. It’s not all bad news though, as current flowerings indicate that the main crop is likely to be 7% up on last year, with estimates of 11 million bags total this year – roughly the same as last year. We also saw Colombian differentials decrease earlier this year – perhaps due to the promise of a better main crop, but there was also talk of a large player single-handedly influencing the differentials after purchasing a considerable volume of Colombian coffee at a lower diff during the Swiss Coffee Dinner.

March was very wet in Colombia, with rainfall far above the average for the month, although we are beginning to hear reports of this settling down now. Hopefully, the weather will remain dry into the main harvest and throughout the processing.