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Sunday, 18 December 2011

Hopefully good news regarding future pricing....

We believe that the current trend in the coffee commodity market will eventually spill over to the non-commercial market (where specialty grade coffee trades), and with the new crops we should see a decrease in the prices of the non-commercial coffees.

Arabica commodity prices

Following the positive export figures from neighbouring Mexico, El Salvador, Guatemala, Honduras and Cost Rica, the authorities in Nicaragua have announced that the countries November coffee exports were 40.14% lower than the same month last year, at a total of 21,575 bags.  They have likewise announced that their cumulative coffee exports for the first two months of this new October 2011 to September 2012 coffee year were 28.45% lower than the same period in the previous coffee year, at a total of 59,019 bags.  This is no reflection on the size of the new crop that is presently in full harvest, as forecasts are that this new crop shall be biennially bearing larger by approximately 16% and therefore, a new crop of near to 1.46 million bags.

Ahead of the impact of the new coffee crops from Colombian, Mexican and Central American crops, the port warehouse green coffee stocks in the U.S.A. predictably declined during the month of November, with these stocks having declined by 251,525 bags or 5.64%, to register end month stocks at 4,207,891 bags.  These stocks do not include transit coffees in bulk containers (like ours) or on site roaster inventory stocks and one might suggest to add approximately 800,000 bags of stock cover at the time, which would indicate that the coffee stocks within the country at the end of the month would equate to approximately 11 weeks of roasting activity.  Thus ahead of the new crop coffees that are now starting to flow in greater volume, a very safe coverage at hand and the decline of coffee stocks last month cannot really be seen to be a matter of any concern.

The Cameroun Cocoa and Coffee Board are actively working to inspire their coffee farmers, following something of a disastrous year and with what they estimate to have been a 43% lower crop.  The Board are blaming the problem partly on the distraction of the high cocoa prices that came with the problems of supply from the Ivory Coast and this commodity having attracted more interest and investment into their cocoa crops, by many farmers.  They are nevertheless working on national distribution of farm inputs to their coffee farmers and with the aid of extension services and seminars, to inspire more care and concentration on coffee farming.

With their new crop coming into its main harvest, the National Coffee Association in Guatemala have reduced their forecast for this new crop by 2.26%, to a figure of 3.45 million bags.  This reduction they relate to the heavy rains that occurred some weeks ago, but one might suggest that this report could in terms of the lower value of the reference prices of the New York market, be somewhat market manipulative in nature.  While there are still some trade and industry forecasts for this new crop, which talk in terms of a crop that shall be approximately 3.7 million bags.

Burundi have reported a relatively good income from this year’s crop, albeit that it was a near to 46% biennially bearing lower crop of a relatively modest 217,000 bags. The next year’s crop can be expected to recover to something in the region of 400,000 bags and perhaps even more, with farmers gaining support to improve their farm husbandry and inputs.  Authorities are targeting a production to over 700,000 bags per annum, in the coming years.

The latest Commitment of Traders report from the New York washed Arabica coffee market has seen the shorter term in nature Managed Money funds within the market sharply reduce their net long position by 49.11% in the week of trade leading up to Tuesday 13th December, to register a net long of 6,726 Lots, on the day.  The longer term in nature and steadier Index Fund sector of the market meanwhile reduced their net long within the market by a modest 1.07% over the same week, to register a net long of 35,911 Lots.
The speculative Non Commercial sector of this market had meanwhile liquidated their modest net long of 1,461 Lots that was registered on Tuesday 6th December and sold the market short over the following week of trade, to register a net short sold position of 6,877 Lots, by last Tuesday.  This net short sold position albeit within an environment of very thin trade, has most likely been further extended by now, with this speculative sell off having contributed to the market hitting new lows for the year on Friday.

The Brazil dock workers in the country’s leading coffee port of Santos have gained an acceptable pay day and therefore the threat of strike is over, which eliminates any fears of disruption in terms of coffee shipments into the New Year.  This news also impacts upon the Sugar, Soybean and Orange Juice markets, as the port is also the main conduit for these important Brazilian export commodities.

Thursday, 8 December 2011

Two okay coffees but we will not sell them

The decision on what coffees we are happy to sell is linked to two crucial factors for me, its drink-ability and its value proposition.

Before we even consider a coffee it has to be highland and shade grown and show good characteristics in the cup. However it is one thing cupping a coffee and finding it scores about 80/100 but another thing assessing the  drink-ability of a coffee. Drink-ability is linked to the morishness of the coffee. If you find that you are drinking a cup of coffee (I drink primarily double espressos) and that you get to the end of the cup quickly or you find yourself getting up to help yourself to another cup, then it is a very drink-able coffee.

A coffee that is very drinkable the cost becomes a minor issue. As a coffee become less drinkable to the point that say you find some cold coffee at the bottom of the cup since you forgot to drink it, the price becomes more important. Just remember we do have to offer a variety off coffees and we have some client that are price sensative, so in a prefect world I would not have to consider this, but I do.

So this week we ordered and listed two coffees:

  • CIGRAH SHG from Honduras,  I suspect this coffee is easy to over roast, and that be why we have struggled a bit. It would easily score 80+ for cupping scores, but the coffee itself is not very morish. It is a pity is some way since CIGRAH (Comercial Internacional de Granos de Honduras) is a member of the Mercon Coffee Group. They do seem to produce better coffees, it just looks like the SHG is more of a okay coffee, and we have picked that up. So although it was initially on offer we have removed it from our offering.
  • Tres Maris from Guatemala, we started doing this coffee after reading a few reports on it. We had been warned that the quality did vary, and I am sure that this one is a good quality but nothing special. It was more drink-able that the SHG, but I was not convinced I could justify the price we had to sell it a  
So both these coffees we have removed from our offering.

These reasons why I am not a big fan of grouping coffee by the country they come from. Assuming a coffee's quality is good because it comes from a country is a VERY bad idea. It is a bit like selling a sparkling wine as Champaign because it comes from France. I find it a good way for coffee people to hide behind their lack of research into the product they sell. The farm / co-op a coffee come from is extremely important and if you are selling a coffee based on a country it is from you may as well just make up names for the coffee and call them you one thing.