Our December Origin Report returns its focus to Costa Rica as the 2022/23 harvest has begun around the country. This marks our fifth harvest for the Ally Coffee sourcing team in Costa Rica, and we were glad to be able to kick off the year with an event bringing together many of our producer partners from around the country. Globally, prices continue their downward trend across all coffee types while cost of production continues to rise, and certified inventories of Arabica have rebounded slightly. Read on for details on the movement in the C Market, facts and figures from the International Coffee Organization, and news from Costa Rica as we look toward this year’s harvest.
The World Market
Source: TradingviewSince beginning its descent in October of this year, the C Market has continued its downward trend into the beginning of December. November saw a few days with price increases, though the net change over the course of the month was approximately -$0.08 / lb. Notably, price volatility remains high with single-day price swings of up to +/-$0.10, providing little certainty for what to anticipate even in the short-term. Since mid-November, the trading range appears to be between $1.55 and $1.70 / lb. At the time of writing (December 5), the market is trading at $1.62 / lb, a 6.7% price drop from one month ago and a 31.7% decrease from this time last year.
Global Coffee Industry Statistics
Sourced from the International Coffee Organization unless otherwise noted. Read their full November 2022 Coffee Market Report here.
- The ICO Composite Indicator Price (I-CIP) decreased by 12.3% from October to November 2022, averaging 156.66 US cents/lb for the latter, whilst posting a median value of 156.83 US cents/lb.
- Intra-day volatility of the I-CIP increased 2.2 percentage points between October and November 2022, reaching 9.3%.
- Average prices for all group indicators decreased in November 2022.
- The Colombian Milds-Other Milds differential suffered a month-on-month loss of 57.2%, closing in at 9.37 US cents/lb for November 2022.
- Global exports of green beans in October 2022 totalled 8.5 million bags, compared with 8.72 million bags in the same month of the previous year, down by 2.5%.
- The New York certified stocks increased by 45.3% from the previous month, closing in at 0.59 million bags, whilst certified stocks of Robusta coffee reached 1.45 million bags, representing a decrease of 4.6%.
Harvest Projections for 2022/23
Costa Rican coffee farmers closed their 2021/22 harvest with a total production of 1,672,510 fanegas of green coffee, equivalent to approximately 1,115,006 bags of 69 kg. Producers saw an average sale price of $2.32 / lb over the coffee year for all types and qualities of coffee. Undoubtedly, even considering that 21/22 was forecasted to be a lower harvest year in Costa Rica’s biennial cycle, harvest totals came up short of ICAFE’s initial projection of 1.2 million bags of 69 kg for the coffee year.
This year’s harvest is already underway across the country, with some regions like Turrialba reporting around 50% harvested while others are just beginning their season. Picking began a little earlier than anticipated, with the dry season yet to fully arrive and intermittent heavy rains speeding up the ripening process for the cherries. Labor, which has been a significant concern since early 2020, seems to be less of a challenge this year; though as issues like the rising cost of production loom over producers, it's difficult to say for certain if labor challenges have lessened or if there are simply greater issues to focus on this season.
Coffee cherries ripening ahead of harvest at Eduardo Duran's family farm in the West Valley region.
Looking ahead, ICAFE projects production totals of 1,864,928 fanegas this year, equivalent to 1,243,285 bags of 69 kg. This projection may prove to be fairly optimistic considering some of the difficulties that continue to bear down on producers across the country and abroad. Cost of agricultural inputs like fertilizers and other agrochemicals continue to rise in price, leaving many producers unable to afford to nourish and protect their crops at the same level that they have historically. However, despite this ongoing challenge, the increased production projection can be attributed to this being the year anticipated to have greater production in Costa Rica’s biennial crop cycle, along with the continued adoption of productive, disease-resistant varieties in cultivation which offset some of the need for agrochemicals.
Increasing Costs, Decreasing Sale Prices for Producers
The 2021/22 coffee year brought fertilizer costs 100% or more greater than usual for some producers, a situation that is a point of conversation among nearly all coffee growers across the country. It should be noted that, as family coffeelands continue to be parceled and inherited by younger generations, a significant portion of coffee producers in the country work on no more than three hectares. This means that, given the fixed costs associated with coffee, rising prices apply disproportionately to smallholder farmers who lack the ability to absorb some of the rising costs through the scale of their production, ultimately making them less competitive in the market as they cannot decrease their asking price any further.
Raised drying beds at Jorge Vasquez's Roble Negro micromill in the Tarrazú region.
Worldwide economic uncertainty is applying its own pressure to the people of Costa Rica, with cost of living rising and the country’s Basic Passive Rate and loan interest rates increasing as well. The Costa Rican Colón has appreciated against the US Dollar, going against what is happening in many other countries, resulting in its own challenges for the export sector. As it stands, each US Dollar received for an exported good ultimately converts to fewer Colóns, meaning less money reaching the producer during a period of rising prices for all goods and services.
All of these factors together paint a tenuous situation for the Costa Rican coffee industry. Producers would need prices equal to or greater than last year’s figures in order to cover their significant cost of production increases. While price differentials in the country have remained relatively constant since the previous harvest, the C Market is currently trading 31.5% below where it sat one year ago; this means that the price basis on which purchase prices are set is significantly lower than last year suggesting that coffee sales prices may come in below last year.
Ally Coffee in Costa Rica
Looking ahead, our Central America sourcing team is excited to begin cupping and selecting coffees in the coming months as the harvest continues for our producer partners throughout Costa Rica. This harvest marks our second season in our new sourcing office in Tarrazú, and we’re thrilled to be so close to one of the hearts of production in the country.
Ally team and partners gathered in our Costa Rican sourcing office
To kick off this harvest season, we held an event in our sourcing office with the majority of our producer partners who we’ve worked with in our five years in the country. The event included a tasting with coffees from other origins, as well as the producer’s own lots which were roasted by some of Ally’s roaster clients around the world. This event was a wonderful way to use coffee as a vehicle to bring us all together at the beginning of a busy season for everyone, and to continue building these relationships as we work toward our shared goal of moving coffee forward.