Dear coffee friends, aficionados, lovers, and anybody who’s interested in our weekly coffee report – here are some notes from Cal’s Coffee:
Firstly, I would like to apologise for the last three weeks that we were away – we were hosting, visiting a coffee farmer here in the UK and only did a quarter of what we planned to do! I’m sure that this is going to be the first of many visits of the farmers who will come over and I know that many of you – roasters and readers – will have a chance to come and visit Brazil, to see the actual coffee farms.
Let’s get down to business and talk about coffee! In the last week, in Brazil, the market was quiet due to carnival (a long bank holiday that extends four-days) with only Friday operating during the week. There was a significant standstill due to the war between Ukraine and Russia. While, in the last 5 days, the market in Brazil was operating at a standstill, in the last 12 days, the coffee market has slumped in relation to the beginning of the year. In these last 12 days, there was a downfall of 1440 points. Coffee was being traded before the war at 265 US cents per pound and is currently being traded at 226.75 US cents per pound. At the end of last Friday, prices ended on 2.3865 US cents per pound.
The USD compared to BRL significantly depreciated which is having a negative impact on Brazilian exports due to the local market being more interested in trading and exporting coffee. Currently, there was an increase in value where 1 USD = 5.156 BRL while, last Wednesday, there was a decrease of 1.57 %. Last week, there was a slight increase of 0.2% altogether. Most of the coffee in Brazil has decreased in value. One coffee sack, on average, was 1,672 BRL and is now being traded at 1,482.52 BRL. There is little being offered as farmers don’t want to trade at these prices which is making the market stagnate.
International coffee stocks are still at an all-time low. Recently there were just above 1,250,088 sacks of certified coffee, while a year ago, on the same date, there were 1,797,622 sacks which is a decrease of 795,034 sacks of 60kg. We have never seen such low stocks of certified coffee. So, why have coffee prices taken such a shock? The reason why prices have dropped so much is due to the war.
We don’t realise that Russia is a large coffee-consuming country. They are the second largest importer of instant coffee that is made in Brazil – about 540,000 60 kg – and altogether Russia consumes 3.5 – 4 million sacks from all over the world. Sanctions and all other actions that the West is taking against Russia is considerably driving the price down for coffee in contrast to all other commodities. The coffee farmers in Brazil are very concerned due to the high dependency on importing fertilisers from Russia, especially the raw materials – potassium and phosphorous. All the bans and embargoes are pushing these costs 3x or 4x higher, which has been evident in the last 15 days.
Most coffee farmers have stock for the next 6 months while some buy stock on the spot. The same trading issues that are happening with coffee are happening with fertilisers between cooperatives and producers. On the 4th of March, shipments out of Brazil were 2876 sacks of Arabica beans, 3804 sacks of instant coffee, totalling 6680 sacks compared to the same day in February totalling 6246 sacks.
While there is little coffee offering in the market; however, the current crop is approaching. Some coffee farmers will start harvesting at end of the March (at its earliest). Though, due to the frost, and current forecasts of it not being a large crop, our Brazilian harvest is likely to start at the end of April/beginning of May. At closing time, a lot of the market is starting to look ahead. The forecast for 2023 is that there’ll be a lot of rain in Brazil which is more optimistic than the current harvest.
Let’s hope that Russia comes to its senses and stops a completely unnecessary war by bringing more stability to the world which is what we all need. Just a little trivia on raw materials; Russia and Ukraine are the largest exporters of wheat and corn compared to the USA and these are the two commodities that are driving a lot of the prices up for food – so keep an eye on this as it’s not just coffee that has pushed the prices up. Raw materials like wheat and corn will have a negative impact on inflation. Unfortunately, this is not the best of news but let’s hope that the future is brighter.
All the very best!
See you next week!
Calum