Welcome to the June 2022 edition of DRWakefield’s Monthly Origin Focus.
The World of Coffee show in Milan has been on everyone’s lips in the coffee industry this month. This has certainly been true of us here at DRWakefield. It was the first World of Coffee since the start of the pandemic and everyone who attended was out to impress. The show was buzzing with people from all across the world and the supply chain, and we were certainly excited to see friends and partners again, as well as meeting countless new faces!
At the start of June, Sterling was fairly strong, sitting at about 1 GBP to 1.25 USD. However, from the start of the month, the £ continued to devalue and by 14 June it was just 1 GBP to 1.19 USD, the lowest rate since March 2020. However, the sterling did regain some ground over the second half of the month, closing out at 1 GBP to 1.20 USD.
In this report, we will delve deeper into Indonesia, Costa Rica and Ethiopia.
Coffee Origin Focus
In Indonesia, the current crop situation is worse than expected. At the moment we are seeing around a 30-40% drop in volume compared to last year’s harvest. Northern Sumatra is particularly affected as many smallholder farmers in the region cut down their coffee trees to grow different crops. They did this largely due to the very low price of coffee in 2020 in favour of crops which, back then, were more profitable. On top of this, as a result of the pandemic farmers haven’t been able to take care of their farms in the same way they usually would as work and travel have been restricted.
Rainfall in Indonesia has been heavier than usual earlier this year, resulting in many coffee cherries becoming over ripe, turning to black cherries, which is not desirable, and has also impacted the volume of cherries suitable for picking. The heavy rain has continued and remains higher than expected. This has raised concerns as some trees have already begun to flower, and the heavy rain may affect the development of the next crop.
Many coffee exporters in Indonesia are currently short due to a lot of early sales at the start of 2022. Because of this local coffee prices are now rising as coffee is in high demand.
As with the rest of Central American countries, this year’s crop in Costa Rica is smaller than hoped. Currently, it stands at 1,671,176 fanegas of cherry, 11.42 % lower than the previous year. In Costa Rica coffee is measured in fanegas, which are the equivalent of 46 kgs. This is a continuation of a trend as last year’s crop was also small, 4.47% less than the one prior. In fact, the current crop is looking to be the smallest crop out of Costa Rica since the mid-70s.
The majority of the current crop had been sold by the beginning of June, with just 8% left to sell. Yet of the coffee sold only 53% had been exported, the remaining 47% either waiting for shipments or having been sold forward. Of all the coffee sold in Costa Rica about 9% has been sold internally for national consumption. Whilst this is higher than many origins, interestingly over the last 3 years, the % of coffee for national consumption has decreased slightly. During the crop year 2019-2020 national consumption accounted for almost 11% of the total crop.
Looking forward to the next crop (2022-2023) there is not yet an estimate of the volume, although estimates are expected to be released by ICAFE shortly. Despite this, 332, 602 fanegas (46 kg bags) next year’s crop has already been sold forward.
During the month of June, the minimum coffee price set by the Ethiopian government was increased. The cost of shipping coffee out of Ethiopia has also risen, meaning that the cost of Ethiopian coffee has continued to rise. On top of which, currently in Ethiopia coffee cherries are selling for a very high price internally. As a result, the cost of a washed coffee in Ethiopia has also continued to increase, as the high cherry prices lowers the incentive to process cherries washed. In short, the cost of Ethiopian coffee has continued to increase throughout this year.
Civil unrest in Ethiopia has continued and our thoughts are with all those who are affected. Protests and fighting brought many towns in the northern Amhara region to a standstill in June, demonstrations and attacks have also continued throughout the Oromia region. There has also been trouble on Ethiopia’s northwestern border with Sudan. However, the leaders of the two countries have been in talks and the conflict looks to be soon resolved.
The Ethiopian Birr has continued on its long-term trajectory of losing value against the US Dollar. At the end of June, the exchange rate stood at 1 USD to 52.3 Ethiopian Birr. For context, at the end of June 2021, 1 USD was worth 43.6 Ethiopian Birr.
Our thanks to our partners Sari Makmur in Indonesia and Coope Agri in Costa Rica.