Brazil continues to be in the spotlight amidst the ongoing market rally, where any indication about the country’s future crop can swing the C-Market one way or the other. In this report we look at the current state of the coffee industry in Brazil and what we can expect in the coming months. The exports from our sister companies continue strongly and we see containers beginning to reach warehouses worldwide. Finally, we take a look at the latest Grupo Montesanto Tavares farming project: Bela Vista in Serra do Cabral state park in Minas Gerais.
The World Market
C-Market Analysis
Source: Tradingview
The coffee futures market has sustained its substantial rally, breaking the seven year resistance mark of $2.28/lb on November 17. This market movement has made global headlines, preparing consumers for the potential of rising prices at the cafe or market, especially as these price increases come at the same time as significant inflation in the U.S. economy. After crossing its previous resistance mark, the market climbed to $2.50/lb before plummeting on December 10 back to $2.32. At the time of writing, the market currently sits in the mid $2.30/lb range.
Global Coffee Industry Statistics
Source: ICO Coffee Market Report, November 2021
- The ICO composite price index broke its ten year high reaching $1.9517/lb, a 7.5% increase over last month and 77.9% increase compared to November 2020.
- Total exports of coffee in the last month totalled 9.68 million bags down 4.4% compared to last year. South American exports saw a steep 20.6% decrease. This was largely compensated for by increased exports from Central America and Asia/Oceania.
- Global coffee consumption for the 2020/21 is now estimated to be nearly 3 million bags larger than expected. This tightens the gap between production and consumption to an estimated 1.97 million bags.
Read the ICO’s full November 2021 report here.
Coffee cherries at Fazenda Alto Sereno in Caparaó, Minas Gerais, Brazil
At Origin
Brazil Post-Harvest Report
Following this year's harvest, some Brazilian exporters are struggling to receive coffee from some producers in the country. Much of the country's crop is purchased through forward contracts, meaning that coffee is negotiated between an exporter and a producer in that day’s present market conditions for a future delivery in upcoming years. Historically, this typically meant producers would receive better prices at the time of delivery since the market was trending down over the previous several years. In other words, it guaranteed the agreed upon price (plus inflation) the producer secured with the exporter which was often higher than the market conditions at the time of delivery. Today, with the current market trending upwards and currently at a high level, some producers have been reluctant to deliver their crop knowing their coffee can sell today at a much higher price than was negotiated at the time of the contract. This scenario would lead to a contract default which hasn’t been seen in decades. Some major traders are pursuing legal action as they report up to 5% of their current contracts have had fulfillment issues. This, together with the ongoing global logistics crisis, have led to a 38.6% decrease in Brazilian coffee exports in November compared to the previous year.
Harvest underway at São Luiz Estate in Carmo do Paranaíba, Minas Gerais, Brazil
Specialty coffee consumption in Brazil continues to rise, resulting in greater competition for microlots and high-end offerings from some of Brazil's most sought after regions. We saw this notably this year, as prices for coffees from regions like Espirito Santo have risen compared to the last harvest. Despite this challenge, we were able to secure a healthy volume of coffee from the region, which continues to impress us with the quality and cup profiles produced by the region's coffee farmers.
Brazil's upcoming 2022-23 crop has been the subject of much speculation following major weather events that have hit the country's coffee producers over the last several months. As the country’s crop develops it will become clearer what we can expect for the next harvest, but current projections from our team in Brazil estimate 60–65 millions bags of all coffee produced for the 2022-23 year.
Ally Coffee in Brazil
We’re pleased to have completed nearly all of our Brazilian single-farm and microlots purchases for the year and are working to ship coffee to our international warehouse partners. In the coming weeks this means navigating the challenges facing international logistics—such as shipping container and labor shortages—to ensure prompt delivery.
Along with microlots sourced from our producer partners throughout Brazil’s coffee growing regions, we’re proud to be able to offer the top lots from the AMECAFÉ Mantiqueira competition for the second year in a row. This competition features women-produced coffees from AMECAFÉ Mantiqueira members, an organization with the purpose of supporting women producers in Brazil’s Mantiqueira de Minas growing region. This year we teamed up again with Cafebras—one of our Brazilian exporting partners and sister companies in Grupo Montesanto Tavares—to support and help judge the competition which featured two categories: Fermented coffees and Traditional Natural/Pulp Natural coffees. We’re excited to announce that we have purchased the top six lots from each category this year to offer to roasters around the world. Stay tuned for more information as these lots become available in the near future.
Lastly, we’re thrilled to announce the newest acquisitions for our parent company: Fazenda Bela Vista and Fazenda Riviera have been added to the Grupo Montesanto Tavares family of farms, joining the well known Fazenda Primavera. These farms are undergoing agricultural renovation to become high-quality coffee farms, and we look forward to adding coffee from both farms into our vertically integrated supply chain in the coming years.