STiR coffee and tea magazine

STiR coffee and tea 27 the Central Highlands, the country's largest coffee growing area. Output will not exceed 25 million 60-kg bags, significantly lower than initial expecta- tions of 29.9 million bags. Favorable weather conditions (hotter days with adequate rain) in major coffee nations in Latin America and South East Asia resulted in sig- nificant growth in output leading to a sharp drop in prices during the past year. This, in turn, posed a serious threat to thousands of coffee farmers in Latin America, some parts of Brazil, Vietnam, and African states. In Central America prices well below production costs are leading to widespread bankruptcies and forced migration. Indonesia, the world's third largest robusta producer at 700,000 metric tons, expects to har- vest 50-60% more beans within the next five years to service a domestic market consuming 300,000 metric tons annually. South American coffee production is expected to decline by 3.2% in the coming year. Brazil exported a record 27.4 million tons of green coffee, a 30% increase compared to 2018/19, according to CeCafe but arabica output, now in the off-year of the biennial crop cycle, is projected at 50-55 million bags in 2019/20, about 15% lower than last year's record 62 million bag harvest. While low prices in Brazil are troubling, Co- lombia is experiencing widespread distress. Rober- to Velez, head of the Federation of Coffee Produc- ers of Colombia says: "We have serious concerns, regarding current prices, which prevent farmers even from covering their production costs." FNC appealed to its largest customers, asking them "to provide help to farmers so that they can get a decent profit." According to Velez, to cover costs, farmers need to earn about $240 per 125 kilos ($1.15 per pound) for green coffee. The federation called on farmers to process beans at the farm and to switch to growing rare, high-value varieties. Ethiopia is one of the major coffee-producing nations in the African continent. According to the Russia's Minister of Agriculture Dmitry Patrus- chev given that most of African coffee growers have traditionally exported their products in bulk, as green, unroasted beans, their revenue has al- ways been small. At current global prices increas- ing production could be simply unprofitable. Patrushev predicts that many African coffee farmers will be forced to conduct massive cuts of their outputs and to switch to other crops, a re- sponse already underway in Latin America where Nicaraguan coffee farmers have been forced to switch to cocoa production. The current crisis forces producers to seek various alternatives. Last year representatives of coffee farmers from more than 30 countries sent an official letter to chief executives at companies such as Starbucks, Jacobs Douwe Egberts (JDE), and Nestle, asking for financial support for their struggling coffee business. In their letter, they cit- ed high risks of abandoning of coffee plantations in many parts of the world, a result that may lead to political and social threats to the industry. Star- bucks committed $20 million to help smallholders do business until coffee prices rise above their cost of production. A ray of hope Traders from the Moscow Commodities Exchange believe tightening global supplies, caused by pro- duction cuts in Brazil and Vietnam, will lift arabica prices to $1.25 per pound by the end of 2019, rising 20-25% higher than current price levels. The Brazilian government is currently con- sidering setting new minimum purchase prices to act as a safety net for the country's coffee farm- ers. Such mechanisms "could help support the market and also remove exportable supplies from the world market," Shawn Hackett, president of Hackett Financial Advisors told Reuters. Rising demand in emerging coffee markets will also provide price support. Ethiopia already con- sumes half the coffee it produces. In China con- sumption is growing 5-10% a year, and in India 6.5%, more than double the 1.5-2.0% rate of consumption growth in the European Union and the US. Demand for coffee is also predicted to grow in the Middle East, with Saudi Arabia, Jordan, and the United Arab Emirates at the forefront. According to some latest analysts' predictions, coffee consumption in the UAE may grow by 30- 35% over the next four years. Russia is another driver of growth in the global coffee market. Annual consumption is growing at a rate of 10-15% through 2022/23. Ground roasted coffee is the main driver with mass market distribution begun only recently, due to the tra- ditional of relying instead on its instant analogue. Analysts of the Russian Ministry of Agriculture predict global coffee prices will increase signifi- cantly in years to come. That is due to the ongoing change in climate that will jeopardize a quarter of Brazil's annual output, and also lead to potential losses for coffee producers in Nicaragua, El Sal- vador, and Mexico. According to the Ministry's report, already within the next decade production areas should move from Central America towards the Asia Pacific region or East Africa, where yields may be higher. Overall, by 2030 global coffee consumption will increase to 200 million bags, compared to the current 163-165 million bags, which, according to analysts of the ministry, will lead to inevitable and substantial price increases in the future.

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