Our May origin report looks at Costa Rica as it is finished with harvest and has started to export coffee with the first arrivals expected this month! It has been a difficult crop year with challenges from start to finish, but we are very satisfied with the shipped quality and happy to welcome many new producer partners to our Ally Coffee community.
The World Market
C-Market Analysis
Source: Tradingview
Following a turbulent month in March where prices fell 12% to as low as $1.20, April opened near the $1.25 mark. After another dip to $1.20, the market began to recover with a rally through the first half of the month to reach as high as $1.35. Another short downward turn dropped the market to $1.30, but the second half of April would see tremendous upward movement, reaching as high as the $1.47 range, finally finishing the month around $1.41. May has seen a bullish first half, including single days gains of 6.5% on May 5th closing nine cents up. The market has reached as high as $1.55 this month, the highest level it’s seen since January 2017, and continues to hold near the $1.50 mark.
Global Coffee Industry Statistics and Analysis
The International Coffee Organization’s monthly market report indicates rising prices for all coffee groups in the month of April. This is the sixth consecutive month of increases, bringing us to the highest monthly average in over three and a half years. Sales volumes are also up for March 2021 compared to March 2020, and total coffee shipments through the first half of coffee year 2020/21 rose 3.5%. World consumption projections are on the rise for 2020/21, and the ICO has revised its global production estimate for the coffee year downwards as a result of the estimated production decline in Brazilian Arabica this year. However, estimated consumption remains 2% below total estimated production for the coffee year. See the ICO’s summary with specific figures below.
In April 2021, the ICO composite indicator rose by 1.4% to 122.03 US cents/lb as prices for all group indicators increased. Over the last six months, coffee prices have recorded a steady increase in monthly averages despite a few daily slumps. Relatively firm prices seem to encourage sales as world coffee exports amounted to 11.9 million 60-kg bags in March 2021, 2.4% higher than in March 2020. Shipments in the first half of coffee year 2020/21 increased by 3.5% to 65.4 million bags compared to 63.2 million bags recorded over the same period in coffee year 2019/20. However, cumulative exports from April 2020 to March 2021 are provisionally estimated at 129.5 million bags, a 1% decrease compared with the 130.8 million bags recorded from April 2019 to March 2020. World consumption for coffee year 2020/21 is projected at 166.3 million bags, an increase of 1.3% on its level of 164.2 million bags in coffee year 2019/20. The ICO has revised its production estimate for the current coffee year downwards, owing to Brazil’s smaller 2021/22 Arabica crop. Despite this, world consumption is forecast to remain at 2% below total production of 169.6 million bags in coffee year 2020/21.
Source: ICO
At Origin
Harvest in Numbers and Statistics
Despite the early signs hinting at a large crop for this season, the year ultimately yielded a 5% decline in harvested cherry volume compared to last year. Estimated production is 1.28 million 69 kg bags, of which 952,000 are sold for export. Costa Rica is struggling currently with an unfamiliar phenomenon of an extraordinarily high percentage of partial and full black beans which will affect the yields in the drymills.
Exports have been slow to be picked up due to the late harvest this year, resulting in only 30% of coffee exported thus far compared to roughly 50% in previous years. The majority of what has been exported so far has been coffee from lower altitude areas. Nevertheless, the crop is largely sold with only 15% reported unsold. According to ICAFE (Instituto del Café de Costa Rica), the reported average farm gate price across Costa Rica stands at $201.49 per 46 kg bag ($1.98 per pound) of exportable green coffee. This price is nearly on par with the price last year, but still $11 down ($0.10 per pound) from the 2018/2019 crop (as per the most recent ESTADÍSTICA DE CAFÉ report from ICAFE).
Coffee cherries ripening at Hacienda Sonora in Central Valley, Costa Rica
Coronavirus Impact
COVID-19 seemed to lay low for quite some time in Costa Rica. Unfortunately, following the Easter holiday, case numbers spiked to levels much higher than the initial waves. The healthcare system is currently beyond capacity as vaccinations slowly pick up..
Many farmers and mills have invested heavily in improving infrastructure at their farms to help prevent the spread of the virus. These investments have all come from producers' savings, which will have to be replenished through the price of coffee. Fortunately, no outbreaks have been reported within the coffee industry in Costa Rica. The biggest impact is still felt in the lack of skilled labor due to the country's closed borders. This labor shortage has resulted in lower quality harvesting, and ultimately lower yields in the drymills
Coffee being dried at Don Elí micromill in Tarrazú, Costa Rica
Future Outlook for Ally Coffee in Costa Rica
The 2020/21 harvest marks the third year for Ally Coffee with a permanent presence in Costa Rica. We embarked on many new projects this year, and are glad to welcome a number of new producer partners to our community along with solidifying other relationships throughout the country. We were also able to further engage our producer partners by purchasing a wider variety of coffee grades from existing partners through the Guanacaste Core Coffee project.
This year we saw an noticeable increase in the supply of Natural and anaerobically processed coffees. The hype around fermentation continues to be alive and well, and we're happy to be able to source an incredible array of profiles and processes. Even still, the classic Costa Rican Honeys are still as good as ever, as well as receiving some stellar traditional Washed coffees.
Despite the hurricanes in November, the labor shortage, and the mysterious phenomenon of the increase in the number of black beans, we're proud to remain committed to Costa Rica and all of our partners here. There is no doubt that prices will be somewhat higher than previous years, but people across Costa Rica continue to deliver on quality, innovation, and sustainability. It is expected that in the coming years the coffee growing areas will continue to shrink and supply will fall. Through our partnerships here we're excited to continue to be a part of preserving the culture of coffee cultivation in Costa Rica, which has been its economic motor since its first export in 1820.