Welcome to this month’s edition of DRWakefield’s Monthly Coffee Origin Focus.
The news this month has been turbulent, to say the least! Labour shortages in the agricultural industry, coupled with a shortage of lorry drivers, meant farms in the UK lacked the workforce to harvest and transport their produce. The lack of lorry drivers combined with media-driven panic buying led to significant petrol shortages across the country and the armed forces being drafted to help ease supplies.
It is not all bad news, however, as COP26, the UN climate change conference, is kicking off in Glasgow this week. Earlier in the month, a letter was written on behalf of 1.8 million Fairtrade farmers to global leaders, urging them to be fair with their $100 billion climate promise and outlining how agricultural production is bearing the brunt of climate change. Only time will tell, but we are hopeful for a positive outcome.
Sterling began October at 1.345 but gained ground against the Dollar over the following weeks, reaching 1.383 on 20th, before closing the month at 1.369.
In this report, we will delve deeper into Peru, Costa Rica and Kenya.
Coffee Origin Focus
Peru
Like for much of the world, 2021 has been an unsettled year for Peru. A general election brought in a new president, Pedro Castillo, and a new party, Free Peru. It was a very tight race, with Castillo winning by a mere 0.13% of the vote and subsequently accused of electoral fraud by his opposition. Political instability coupled with economic uncertainty has weakened the Peruvian Sol against the US Dollar, standing at roughly 4 Sol to 1 US$ as of 29th October.
Peru’s 2021 coffee harvest has been marked by low production, high prices and, of course, the global shortage of containers which has wreaked havoc with shipments. Since the start of the pandemic, the way coffee is sold has changed in Peru. Now coffee is bought directly from producers’ farms, and the producer can sell to whoever offers them the best price. This, coupled with low volumes of coffee being produced, has meant prices have risen considerably, meaning the producers are receiving more money for their coffee.
The shortage of shipping containers has hit Peru particularly hard. The crisis has made obtaining a space from a shipping company near impossible. The freight rates have risen hugely, and it is difficult to know whether once a container has been booked onto a boat if it will get the space. Cancellations and delays have become very common and often only happen a few days before a shipment is scheduled to leave.
However, despite this uncertainty, the 2022 harvest in Peru is looking positive. The weather has been ideal for good flowering, and the increased prices have meant that producers have more money to fertilise their crops.
Costa Rica
Coffee is grown widely across Costa Rica. With areas of coffee cultivation accounting for nearly 2% of the total territory. Production has decreased in recent years due to ageing trees which produce a lower yield, and a growing problem with Rust attacking crops. For context, back in the early 2000s, a hectare of coffee yielded on average 21.5 bags of 60kg, whereas this crop is producing just 14.7 bags of 60kg per hectare, considerably less than before. The 2021-2022 harvest is currently predicted to total 1.3 million 60 kg bags. If this prediction is realised, this harvest, alongside the 2018-2019 harvest, will be the lowest since the mid-1970s.
The weather for this year’s harvest looked initially positive. Back in April, rainfall was favourable for flowering. However, once the flowers were open, the rain became heavier than usual, damaging some crops and, when combined with warmer than average temperatures, creating a humid environment that is perfect for the proliferation of diseases such as Anthracnose and Rust. The impact was greatest in farms at higher altitudes, which are more exposed to the elements. Despite the less-than-ideal conditions, most crops survived without significant damage due to the good practices of producers.
Over the last two years, the Costa Rican Colon has experienced significant devaluation against the US Dollar. At the start of 2020, 1 US$ was 566 Colones, whereas as of 31 October 2021 it stands at 1 US$ to 631 Colones. Whilst a devaluation of currency does improve domestic prices for the sale of coffee, on the flip side, it also increases production costs for the producer.
Kenya
The end of October also saw the end of Kenya’s long-standing curfew. The curfew had been enforced ‘dusk till dawn’ for over 500 days to try and curb rapidly growing cases of Covid-19. Daily average cases have now fallen below 100 and the curfew has finally come to an end. Many Kenyans are relieved, particularly those working in the hospitality industry. Over the course of the pandemic, an estimated 7500 bars, hostels and entertainment spots were forced to shut, resulting in about 250,000 jobs being lost. The Kenyan government’s new strategy in fighting the pandemic is to encourage vaccinations, although only 2.8% of the population has been fully vaccinated.
Weather across the coffee-growing regions of the country has been very promising throughout October; hot and sunny for most of the month, with the rains beginning to fall in the final weeks. Producers in high-altitude areas are expecting to start their harvesting shortly. Some very early harvest of Kenya’s main crop is showing a lot of potential in the cup, promising good things for the rest of the harvest. At the Nairobi Coffee Exchange in the final week of October there were 10,000 bags of coffee on offer at the auction, largely commercial grades, but with the odd high-grade lot too.
Our thanks to Johnathan Duran from Coope Agri in Costa Rica, Fabian Calderon Mora from STC in Costa Rica and Lenin Gomez from Sol&Café in Peru.
