Executive summary for Jan 2012

6th. January, 2012

The New Year has been a quiet one for the Brazil coffee industry, driven mainly by the fact that they have cash reserves from the 2011’s high value and profitable sales. This stance will probably persists, with five months of reserve until there shall be pressure to start selling the forecasted biennially bearing new crop coffees. This therefore sees sales of the declining stocks from last year’s harvest remaining slow.

The advantage that Brazil’s farmers have is that there are a good number of consumer market roasters (i.e not people like Quaffee who value quality coffee over all else) who rely upon the low price and taste profile of high percentages of Brazil coffees within their blends with no real volume competition for Brazil Arabica based coffees, they remain in the driving seat in terms of prices they can demand. This is of course not a permanent situation and they can only buck the dictates of the international markets to a degree, but for the short term consumer industry buyers are taking a very much hand to mouth stance and exporters are finding it difficult to buy in coffees within the price levels offered by their international clients. While with the slow nature of new business and internal buying, it is limiting the volumes of price fixation hedge selling from Brazil against the New York market and is to a degree, somewhat supportive for this market.

There is surprisingly little news coming forth from Mexico and Central America and especially so, with the new crop coffee stocks increasing by the day. This is indicative of a good new crop, as no news controls the market pricing better.

Preliminary indications from the Uganda Coffee Development Authority are that the country’s coffee exports for December were 1.91% higher than the same month in the previous year, at a total of 242,301 bags. This was a good end to the year and with this performance falling within the new October 2011 to September 2012 coffee year figures, is supportive towards the countries forecast to export over 3 million bags during this present coffee year.

The Certified washed Arabica coffee stocks held against the New York market decreased by 575 bags yesterday, to see these stocks registered at 1,529,769 bags. There was meanwhile a slightly larger 3,520 bags increase in the number of bags pending grading for the exchange, which was registered at 13,766 bags.

9th. January, 2012

The Agricultural Ministry in Indonesia, with the country coming out of two years of climatic issues that were related to the unusually persistent and heavy rains that came with the La Nina phenomenon in the Pacific, has reported coffee production was 7.7% lower than the previous year, at a total of 10,566,500 bags. Although only 30% of this crop is Arabica, it is worth noting this production figure.

This year’s forecast of the new coffee crop to increase by 13% to a total of 11,966,667 bags, which while more modest than the general range of private trade and industry reports, does nevertheless agree with the view that with the La Nina on the wane that the Indonesian coffee crop shall be larger this year. Although these figures are not necessarily accurate, it is more than likely that there will be a larger crop in play and despite growing domestic coffee consumption, the coffee export potential from Indonesia could increase by 2 to even 3 million bags for the calendar year. So that is 750,000 or 1 million bags of Arabica

Still, there is little news in the way of news from the other main producer blocs, with Mexico, Central America and Colombia in full harvest. Their tendency for producers to try to protect prices with scare stories remains an indication that medium to longer term coffee supply remains on track to become surplus supply and especially so, with the advent of the new Brazil, Indonesian and Indian coffee crops that shall impact from the second quarter of the year onwards.

10th. January, 2012

Honduras and Costa Rica have reported higher export figures for the month of December and for the coffee year so far, the authorities in Guatemala have confirmed that the country’s coffee exports for the month of December were 2.16% lower than the same month in the previous year, at a total of 177,303 bags. The country has however had a good start to this new October 2011 to September 2012 coffee year and in this respect, they have reported that their cumulative exports for the first three months of this coffee year are nevertheless 12.61% higher than the same period in the previous coffee year, at a total of 381,500 bags.

The authorities in Mexico have reported that the country’s coffee exports for the month of December were 22.5% higher than the same month in the previous year, at a total of 163,190 bags. They have likewise reported that their cumulative coffee exports for the first three months of this October 2011 to September 2012 coffee year are 52.16% higher than the same period in the previous coffee year, at a total of 512,032 bags.

11th. January, 2012

The Brazilian Green Coffee Exporters Association following last month’s export figures of 2.56 million bags of green coffee, have concluded that green coffee exports for 2011 were 1.35% higher than the previous year, at a total of 30.1 million bags of green coffee. However with the high prices last year, the revenue from green coffee exports was an impressive 52.3% higher than the previous year, at a total of 8.7 billion US$. This value of last year’s green coffee exports has elevated the prominence of the country’s coffee industry within the agricultural sector, as coffee accounted for 9.2% of the total agricultural export income for the country, which totalled 94.59 billion US$. Beef export is still the largest by far.

The first official new crop forecast from Brazil was announced early yesterday afternoon, with the Government Crop Supply Agency CONAB announcing that they forecast a crop to start in April this year, of between 48.97 and 52.27 million bags. This forecast related to an approximate 74.5% share of Arabica coffees, with the balance related to Robusta coffees.

This relatively low forecast is not unexpected as historically the official forecasts have always been anything from 10% to 15% below the follow on reality of the evidence of the domestic consumption and the export volumes. Thus one might say that this forecast would indicate confirmation of the many earlier private trade and industry forecasts, of between 55 and 58 million bags.

There has been little news over the past weeks from Colombia as the world’s leading fine washed Arabica coffee producer (and Quaffee are proud to have some of these excellent coffees acquired through the relationship coffee model), where the past two years have produced relatively dismal weather affected modest crops. It is however noted that the second milder follow on La Nina phenomenon in the Pacific Ocean is on the wane and the country has been experiencing some early New Year sunny dry spells. This while early days, is an indicator of the prospects for much-improved production levels for the second half of this year and particularly so, for the next new main crop that is due to start being harvested in October this year.

12th. January, 2012

Mexico and Central America have now harvested over 50% of the new crop coffees with farm and mill stocks steadily increasing, this may soon encourage some catch up hedge selling activity. While with the consumer market roasters still mostly maintaining a short term buying policy and resisting high differential demands for new crop coffees from the producers, there might be some degree of underlying support for the short term to soften the fall that might come with a market reversal.

The larger new Indian and Ethiopian crops are starting, the larger new Indonesian crop is due to start in three months and to be followed a month later, of a larger new Brazil crop (as already discussed above). This is aside from prospects for an overall larger new crop for this year, from the East and Central African producer bloc of Uganda, Tanzania, Kenya, Rwanda and Burundi. With this latter producer bloc, while not significantly large in terms of world production, nevertheless offering a nice mix of Robusta, natural Arabica and quality fully washed Arabica coffees.

13th. January, 2012

Despite the positive nature of coffee exports reported for the past three months from its neighbours, the authorities in El Salvador have reported that the country’s coffee exports for the month of December were 45.53% lower than the same month in the previous year, at a total of 81,697 bags. This relatively dismal December performance has contributed to the cumulative coffee exports from the country for the first three months of this new October 2011 to September 2012 coffee year being 23.83% lower than the same period in the previous coffee year, at a total of 134,760 bags.

This decline in export volumes from El Salvador is however not unexpected as the country had a fantastic crop for the previous November 2010 to March 2011 harvest, which had fuelled sharply higher export volumes for the previous coffee year. This bumper crop has thus resulted in a biennially bearing lower new crop for this year that had been forecasted to be 30% lower than the previous crop, with some talking as high as a 45% decline in production.

Nevertheless, with El Salvador aside and taking note that the country accounted for only 10% of the regional Mexico and Central American production for the previous coffee year and is forecasted to account for only 7% of the regional production for this new October 2011 to March 2012 harvest, the overall regional production remains on track to be a good crop, this despite the fact that export figures from Nicaragua are still not released but are anticipated to be 24% higher than the same period in the previous coffee year, at a total with Nicaragua’s December figure estimated, of approximately 1.89 million bags.

In terms of Central and South American fine washed Arabica coffee production, Peru continues to grow its industry and with the past couple of years of good prices and profits, the resulting rising levels of farm inputs are expected to further fuel growth. The countries coffee council in this respect, has reported that coffee production for 2011 was 29% higher than the previous year, at a total of 5,213,333 bags. While with the benefit of good reference prices through the year, Peru’s income from coffee exports was 80% higher than the previous year, at a total of 1.55 billion US$.

This official production figure from Peru is however something of a surprise, as there are many trade and industry reports that have so far pegged the countries production at closer to 4 million bags, but even if the always difficult to quantify volumes of production are open to adjustment, one would presume the registered export value must me near to accurate. Whatever the crop last year, this country is nevertheless steadily becoming a year by year stronger player in terms of consumer market fine coffee supply and is in something of a race with Honduras to overtake Guatemala, who has traditionally held the second place to the market leader Colombia, as the leading fine coffee exporter.

16th. January, 2012

The La Nina which brings with it relatively excessive rains for the South Pacific countries is on the wane, but it is nevertheless the main October to April rain season for most of Indonesia and the country with the new crop coffees getting closer to maturity, reporting regular rain showers over most of the coffee districts. These weather conditions bring with them some scare stories of excessive rains causing cherry drop and difficulties to dry harvested coffees shall be negative for the forecasted larger crop, but with the relatively modest La Nina expected to disappear by or during the second quarter of this year, the prospects are for relatively normal weather conditions to prevail for this new crop harvest. Therefore, one might presume that for Indonesia it shall be a near to normal harvest season and that the larger new crop for the present, remains a safe bet and that by the second half of the year there shall be increasing coffee supply from this the important coffee producer.

There is however a reluctance on the part of Indonesian exporters to sell new crop Robusta and Arabica coffees forward, as the combination of volatility of the reference prices of the London (that controls the Robusta pricing) and New York markets and the experiences of the past year of insecurity of market related coffee supply from the farmers and internal market traders, has burnt many fingers and most exporters prefer to take a wait and see stance. This situation sees the country remain very much sidelined from day to day coffee business within the consumer markets and thus for the present and with a likewise cautious exporter demand for premium differentials ahead of the new Indian Robusta coffee crop, world Robusta coffee supply from Asian producers remains focused on new crop Vietnam coffees.

17th. January, 2012

The Coffee Board of India have reported that with carryover stocks low following an aggressive high volume export year and ahead of the new crop, that the country’s coffee exports for the month of December were 7% lower than the same month in the previous year, at a total of 333,333 bags. They have likewise reported that the countries cumulative exports for the first three months of the new October 2011 to September 2012 coffee year are 14.75% lower than the same period in the previous coffee year, at a total of 976,633 bags.

India has nevertheless, following a high volume of coffee exports for the first nine months of 2011, reported that the country’s calendar year exports were 28% higher than the previous year, at a total of approximately 5,833,333 bags. This impressive performance and with little in the way of carryover stocks in hand and despite an estimated 6% increase in the new crop that is now starting, might be difficult to match for this year, albeit that the country can be expected to remain a significant supplier to the consumer markets of a good volume of Robusta and Arabica coffees. These coffee exports with the rising domestic consumption taking a good bite into the lower-priced Robusta coffees, expected to be a ratio of 71 to 29 Robusta to Arabica coffees.

The Colombia Coffee Federation following a dismal year of La Nina excessive rains weather affected production have reported that production for the calendar year of 2011 was 12% lower than the previous year, at a total of 7.8 million bags. This decline has seen the country’s exports for the year fall by a more modest factor of 1%, to register exports for the year of 7.73 million bags. Conditions are however with the La Nina on the wane improving and the country is forecasting production of around 9 million bags for this year, which would be expected to fuel exports of over 8 million bags for the year.

One might, however, suggest that with a good percentage of new higher-yielding and disease-resistant coffee varieties planed out over the past ten years of a national rejuvenation program, along with much-improved weather conditions prevailing and forecasted for the rest of the year, that the recovery in Colombia might be much better than many presently forecast. This might especially impact upon the prospects for the end of the year larger main crop that is due to start in October, which might well still fuel an overall crop of fine washed Arabica coffees for this year, which shall well exceed 10 million bags.

The ICO (International Coffee Organisation) which is obliged by nature to use the traditionally discounted conservative official figures forwarded by many producer members and especially so leading producers such as Brazil and Vietnam, have increased their earlier October 2011 to September 2012 coffee year world coffee production forecast by 2.95%, to a production figure of 132.4 million bags. This figure does of course due to the timing, include last year’s lower and officially discounted biennially bearing Brazil crop within the figure, but by May the larger new crop from Brazil shall actually come into play. Thus in terms of actual coffee supply for this new coffee year and with official figures adjusted closer to reality, one might think to rather apply a significantly higher figure of in excess of 140 million bags and thus a surplus supply of in excess of 5 million bags.

This increase in the ICO figures was in meantime is related to what they foresee to be a rather dramatic 30.67% increase in the Ethiopian new crop that is now starting, which they now peg at an impressive 9.8 million bags. If this forecast for Africa’s largest producer and likewise largest coffee consumer is to become fact, it shall most certainly fuel a surge in exports for this year, which would, see the country’s export potential exceed 4 million bags maintain its status as the continents leading coffee exporter. Likewise with this increase related mostly to the countries lower priced natural Arabica coffees rather than the more speciality branded washed Arabica coffees, it adds increased natural Arabica coffee supply for this year, on top of a forecasted larger new Brazil natural Arabica coffee crop that shall start to impact by June.

18th. January, 2012

Following the positive export figures for the first three months of the coffee year from Mexico, Guatemala, Honduras, and Costa Rica, Nicaragua have joined El Salvador with lower December figures that indicate a slow start to this new coffee year. The Nicaraguan authorities have reported that their December coffee exports were 45.71% lower than the same month last year, at a total of 52,120 bags. This having contributed to the countries cumulative exports for the first three months of the present October 2011 to September coffee year being 37.73% lower than the same period in the previous coffee year, at a total of 111,138 bags. However, this does not indicate a problem, as so far the forecasts for the new crop harvest is nearing its peak are for a 14% improved new crop of approximately 1.6 million bags.

Agricultural Ministry of Indonesia are still expect to total near to 6.7 million bags, in line with already forecasted a 13% increase in coffee production for this year. The new coffee crop is now pegged at 11.97 million bags.

19th. January, 2012

Even though we source our Kenyan Kagumo coffee direct it is of interest to note that Kenya Coffee Exporters Association state that with improved weather conditions in play, the early forecasts are that for this present October 2011 to September 2012 coffee year, the Kenyan crop might well recover up to near to 800,000 bags. This is good news considering that the country’s coffee production for the October 2010 to September 2011 coffee year fell by 13% from the previous coffee year’s crop figure due to mostly weather related issues, to total only 610,483 bags. This follows an already dismal 2009 to 2010 coffee year crop of 702,000 bags, which was already well down by 26% from the 950,000 bags produced in the 2008 to 2009 coffee year.

This improved crop to join larger new crops that are forecasted for this coffee year, for Ethiopia, Rwanda and Burundi. With these coffees added to the steady crops from Uganda and Tanzania, to assist towards much improved regional coffee supply.

Meanwhile with reasonable weather conditions in play and export registrations in hand, the Uganda Coffee Development Authority have forecast that coffee exports in January shall most likely be 7% higher than the same month last year, at a total of 230,000 bags. This forecast being supportive of the authorities earlier forecast that the country shall register coffee exports for this present October 2011 to September 2012 coffee year, of approximately 3 million bags.

20th. January, 2012

Slower December sales from coffee producer bloc of Mexico, Central America, Dominican Republic, Colombia and Peru are however not only related to the relatively modest nature of the new main crop from Colombia, but are also related to some degree of reluctance on the part of consumer market roasters to support purchases of any more than what is actually needed for short term roasting requirements, of these new crop coffees. While many producers with good finance in hand from the past year of profitable sales, are likewise reluctant to aggressively sell new crop coffees to the market that remains in something of a doldrums.

The Colombian Coffee Federation was up to six months ago forecasting that with the constant rejuvenation program that has been in play for some years now and is steadily year by year, supporting the replacing of aged coffee trees with new higher yielding and disease resistant varieties, that the country’s coffee crop would be in excess of 14 million bags per annum by 2015. They have however now but without any specific figures or facts quoted, indicated yesterday that the country shall struggle to recover from last year’s rain affected crop level of below 8 million bags and might take as much as four years to recover to their earlier crop levels of in excess of 11 million bags per annum. This is something of a turnaround in official sentiment from within the country and while there is no doubt that 2012 shall not be high volume production year, one might see that this latest interview was leaning to some degree of market manipulation, following the softening nature of the reference prices of the New York market.

24th. January, 2012

Despite the relaxation of state controls and the handing over of farms to prospective coffee growers in Cuba, it has yet to impact upon the country’s coffee production. In this respect they forecast that this year’s new crop that is in harvest shall do little better than match last year’s crop of 100,000 bags, which accounts for only 25% of their domestic markets coffee requirements. They do however foresee that by 2015 with new coffee farms progressing, that the country shall see their crop increase to a near to self-sufficiency 367,000 bags, with a longer term forecast to crops of around 467,000 to 500,000 bags, that have not been seen since the 1970’s.

With a rising domestic consumption, the Coffee Board in India has estimated that the country shall have to increase coffee production by approximately 5% per annum, for the coming years. This is however not a difficult target under the present circumstances, as the country’s overall average coffee farm yields have been well below potential and with rising input levels and improved farm husbandry there is already a significant potential for increased production. This is aside from the example of improved profits for coffee farmers over the past couple of years, that there are many new coffee farms being planted out in not only the traditional coffee districts, but also in new districts for the industry. Thus one might suggest that despite the rising coffee consumption within India that the country shall remain a steady supplier of both Robusta and Arabica coffees to the consumer markets for the foreseeable future.

25th. January, 2012

Brazil’s Coffee Industry Association have estimated that the countries domestic coffee consumption increased by 3.1% during 2011, to total the equivalent of 19.7 million bags of green coffee. This figure that puts the country only marginally behind the U.S.A. as the world’s largest coffee market was however predicted, while based on this steady growth one might expect that Brazil shall consume in excess of 20 million bags during the course of this year. While the association is confidentially forecasting that by next year the country shall see annual consumption rise to 21 million bags per annum, which shall be getting close to the 23 million bags per annum, that is the estimated consumption level in the U.S.A.

The country does nevertheless expect to harvest well over 55 million bags from this year’s new crop and with exports forecasted to be around 32 million bags, their vibrant domestic market is not expected to have a negative effect upon consumer market coffee supply from the country. Albeit that the new crop that many still see to have to potential to even exceed 58 million bags, shall not be expected to provide for a significant surplus supply. Meanwhile with the positive financial input from the past two years of profitable coffee sales, it has been inspirational for Brazil’s coffee farmers and one can expect that good levels of farm inputs and planting of new coffee trees, shall see that with unforeseen negative weather conditions aside, that the country should maintain a steady growth in production levels and stay ahead of both the rising domestic and international demand for Brazil coffees.

There is also somewhat off the horizon for the present and not as regularly debated, a similar growth in domestic coffee consumption within Indonesia. This country also has a steady growth in coffee consumption, which is perhaps quite difficult to truly assess. There are official domestic consumption figures that would indicate a domestic consumption of approximately 3.5 million bags for this year, but there is also a considerable level of tax free unofficial farm produce transference to the informal retail industry. With the improved new crop that is due to start being harvested shortly, on track to significantly increase export volumes for this year over the past year’s dismal performance, which should add in excess of 2 million bags to this year’s global coffee supply.

The latest reports from the Japanese market, which is in terms of consumer countries the third largest coffee consumer and overall once Brazil is included, the fourth largest market, indicate no real growth in coffee consumption. The tea market in Japan is however showing considerably more muscle and with many new options of fruit, herbal, instant and bottle tea products on offer, this market increased by 4% during 2010, with prospects for further growth once the figures for 2011 are released and likewise, for this year.

27th. January, 2012

Crop levels over the past couple of years in Colombia have not impacted upon the countries higher value specialty quality coffees, with the Colombian Coffee Federation forecasting that they expect to see the counties exports of these special coffees increase by at least 3% for this year. These exports they foresee, shall exceed the 1 million bags mark, with fine Colombian coffees holding a good market share within the specialty coffee sector of the consumer markets.

This figure becomes even more impressive, as it is related to the countries forecast for 2012 total fine Arabica coffee exports being between 8.5 to 9.5 million bags. Thus the speciality sector of the country’s exports expected to account for approximately 9% of total exports, which is an impressive share. While it would indicate that Colombia might well account for an approximate 15% of the total specialty sector, within the consumer markets.

Despite higher prices and the economic situation Starbucks has found that in the USA sales increased by 9%, and their European outlets have increased by 2%

Brazil like the South America producers has shown restraint of accepting the asking prices from the countries exporters, which has contributed to unseasonably low volumes of trade.

30th. January, 2012

The Brazil Agricultural Ministry has forwarded an early supportive statement, that steady liquidation of stocks from their previous price support programs, does not indicate any change in strategy and is only an opportunity in terms of reasonable market prices, to recover funds and free up coffee warehouse space ahead of a larger new crop. They made it very clear that should the international market head softer so as to threaten profitable prices for their coffee farmers that they would have no hesitation to introduce a new price support options plan and take on new coffee stocks, so as to tighten export supply and ensure fair prices for the new crop coffees.

31st. January, 2012

January is coming to a close with most of the main coffee districts in Brazil having reported rainfall for the month that matches to exceed their five-year averages for the month, which supports the steady development of coffee cherries towards this year’s biennially bearing larger new crop. In a couple of months the new Arabica coffee crop from the central and southern coffee districts of the country, with most private trade and industry forecasts still indicating a new crop of at least 55 million bags.