Market Watch: 10/9/2018 by Education RoyalNY

Technical Analysis of the New York Futures Market

In response to the Sulawesi Earthquake and Tsunami Crisis we have started a GoFundMe campaign to support the work of Doctors Without Borders in the region. For more information, please visit: https://www.gofundme.com/emergency-aid-for-sulawesi


Longer-term, Monthly, and Weekly charts

This quarterly report may likely be one of significance.  Not only can one see on the above chart that the market has held, with some “forgiveness”, the $1.00 level but now it seems that a reversal pattern for the month of September 2018 has led to a recognizable recovery.

The weekly chart really is not much different from the monthly chart.  It has shown some deceleration of price momentum, is approaching a challenge of longer term downtrend lines and also had a reversal pattern on the chart.

Shorter Term Daily Chart

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On the daily chart, one must respect short term factors.  We must take into consideration the market has seen just one week of short covering (not so significant LONG TERM) and has approached the 50% retracement of the May 2, 2018 high to the September 18th low ($1.1330) and has tested the 100 DMA at $1.1214.  This “leg up” may now be due for a correction, but unless current market factors (see below) change, any healthy retracement of this rally would likely be corrective in nature.

Consider these few factors;

  • Commitment of Traders had shown the funds and specs short position at record levels of short positions (roughly 105,000 lots).  This amount of short position amounts to roughly 26 million bags of coffee for New York “C” alone.  When combined with London, most had expected the number of shorts to have exceeded 35 million bags of coffee.  Taking into consideration that position against any surplus in coffee supply, a conclusion could be drawn that the sheer size of such a speculative position would not have been sustainable.

  • Additionally, for some origins (Brazil, robusta, others) we are above cost of production.  However, for some source countries, particularly the better mild coffee producers, we were and still remain below COP.  Low prices may induce farmer neglect and poor crop care and this will affect differentials and the availability of better quality coffees in the future.

  • Add to this, how some coffee producer advocacy groups are speaking of governmental support programs and even minimum pricing and one must strongly consider extending “buy-side” price protection further out the calendar.  (The Brazil Farmers Confederation have asked the government for funding in hopes to avoid selling the new crop harvest at sub $1.00 prices)

Macroeconomic Factors

The support in the Brazilian BR Real has elevated prices for the past week. Much of this move is Real related, not so much US Dollar related.  Traders will factor in the results of the Brazilian Presidential election this past weekend, where candidate Bolsonaro is construed as “bullish: BR Real”.  So with the runoff election due October 28th, we have nearly three weeks of volatility to add to the possibility of some corrections of our initial rally off the lows to possibly feeding more short coverage too.

Source Country Commentary

Brazil  

Differentials have remained moderately firm over the past quarter especially for nearby shipments and coffees landed and offered spot.  A softer futures market along with port congestion and limited availabilityof space on vessels, contributed to firm short term differentials regardless of the large Brazilian crop.  With the recent uptick in both the New York “C” market and the Brazilian BR Real, expect diffs to plateau or soften slightly as farmers interest in selling increases.  

Central America 

Honduras

Compared to last year differentials have only gone up slightly relative to the decline in the futures market.  Producers/exporters have been willing sellers of new crop coffee because once again Honduras will be the largest producer in Central America.  

Costa Rica 

West Valley is expected to have a lower yield this year due to a combination of un-seasonal rains after flowering, pests and strong winds.  These are all major contributors for the expected reduction. The Tarrazu region is not impacted as much and may not see similar losses, although a slight decrease is expected due to a big harvest last year and what they are believing will be an off cycle this year on yield. Offers from origin have changed a little from differential pricing to asking for fixed prices due to recent lows in the market and fear of the market staying near these levels into the shipping season.

Guatemala 

Looking for a similar harvest for this year… approximately 3.5 million 60 kilo bags.  There are two underlying concerns of the farmer for the 2018/2019 harvest; 1) Will roya return again and 2) will prices improve for them?  For many this will determine if they abandon their farms or continue in the coffee business.

Africa 

Ethiopia

Has not started picking.  Please know that weather for the next 6 to 8 weeks will be a big factor for quality.

Kenya

The fly crop has just ended and was small, however it is and too early to tell what the main crop will result.

Far East and Indonesia  

Sumatra has been the strong barometer for Indonesian pricing over the last year as record high internal prices have prevailed. With the new crop upon us, the market is looking for some relief, however initial pricing remains firm as the flow of new crop offers has been sparse. Sulawesi, Bali Blue Moon and Kintamani are making their way to our warehouses, so get your name on some as the window of deliveries is small. Additionally, look for some price ease with recent new crop Timor arrivals.  

At this point in most producing countries crop cycle and with recent lows in the futures markets, our focus here at Royal is aligning ourselves with good supplier partners who will do their best to maintain quality given the change in prices year on year.

Demand

Roaster interest to extend fixations has been constant as market prices eroded through the summer.  Buyers are now pricing through the 2019 calendar.  

This outline is intended to promote thought and an exchange of ideas.  If you have an interest to share your point of view, please do not hesitate to call your sales rep here at Royal, or you could call me.

Good luck,

                Fred Schoenhut

                Royal Coffee New York, Inc.

                (908) 756-6400

Guatemala Antigua APCA Lots Have Arrived! by Dan Loughrey

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In 1875, the Rodriguez family bought Finca Capetillo (which is the name of their mill and one of their fincas) purely for sugar cane production, but realized soon after that they could also produce coffee given the landscape of their land. In 1945, respected lawyer José Falla partnered with Federico and Ernesto Rodriguez Benito to create Rodriguez, Falla & Co., which has managed the farm ever since. In 2002, Pedro Echeverria Falla (grandson to Jose Falla) became the General Manager of Capetillo and has maintained it ever since. Both his grandfather Jose Falla Aris and the Rodriguez Benito Family own the land still to this day.

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There are several keys to Finca Capetillo's success. Considerable experience with coffee drying and processing along with a combination of modern equipment and traditional techniques allows for consistent quality delivery. The 300 hectares of the farm are well-defined, allowing for superior traceability for each lot. This traceability continues throughout processing, with each lot followed with careful attention from harvest through preparation for export. A combination of good altitude, the right amount of rainfall, and uniquely formulated soil helps the (mostly) Bourbon coffees develop throughout their production cycle.

Royal Coffee NY is offering one lot from Finca Capetillo this year:

  • 38181: Guatemala Antigua Capetillo Yellow Bourbon - APCA (GP)

Santa Catalina is a farm near the Acatenango volcano in Antigua. The farm is 95 hectares in size, of which 70 hectares is devoted exclusively to  coffee production. The remaining 25 hectares have been set aside as a forest preserve close to the Acatenango volcano. Santa Catalina produces a number of different varietals including Bourbon, Caturra, Catuai, and Pache. After harvest, coffees from Finca Santa Catalina are sent to Finca Capetillo for processing and milling.

Royal Coffee NY Is offering two lots from Finca Santa Catalina this year:

  • 38183: Guatemala Antigua Santa Catalina Caturra - APCA (GP)
  • 38186: Guatemala Antigua Santa Catalina Pache C - APCA (GP)

Finca La Travesia  ("The Journey") is situated a little higher than the other farms, with some sections at over 2,000 meters above sea level. They produce mostly Bourbon, Caturra, and Catuai, and (like the others) their coffee is processed at Finca Capetillo. The farm has competed several times in both the APCA coffee competition and the Cup of Excellence.

Royal Coffee NY is offering one lot from Finca Travesia this year:

  • 38187: Guatemala Antigua Travesia Caturra - APCA (GP)

Named after the clouds, Finca Las Nubes is located on the slopes of the Acatenango volcano facing the city of Antigua. It was formed in the early 1970's and has been producing coffee ever since. Finca Las Nubes produces mostly Bourbon and Caturra varietals, and sends its coffee along to Finca Capetillo for post-harvest processing. Las Nubes has won the Best Coffee within the APCA six times, and has participated in the Cup of Excellence auction six times as well.

Royal Coffee NY is offering one lot from Finca Las Nubes this year:

  • 38185: Guatemala Antigua Nubes Bourbon - APCA (GP)

Market Watch : June 29th, 2018 by Fred Schoenhut

Second Month Continutation Charts

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Technical Analysis of the New York Futures Market:

As I would normally do, I review my comments from our previous market letter to see what points of emphasis might need to be made, to effort an avoidance of repetitiveness and to see if our comments might have proved valuable.

Seeing as though we have experienced confined market ranges that continue the existing trend since our last report, (up five or six cents and then back to unchanged and down for five or six cents) one could certainly guess that comments too may be little changed over the past 3 months.  Well, that is in fact the case now in June of 2018.

Once again, we will take a look at two time frames for the purposes of studying chart activity.  Weekly which gives us a long term analysis and daily, which will enable us to analyze the shorter time frames.

The weekly chart shows a steep and relatively unchallenged down trend line that dates back to late 2014.  Currently that resistance is at the $1.4000 area.  A more recent downtrend line which began in late 2016 was nearly challenged 6 weeks ago, but remains today at above $1.2500.  One point of note is that a secondary line of the previously mentioned 2016 line (mid-2017 to current) had been broken in the recent April to June 2018 rally from the $1.15 area to the $1.27 area.  This gives one reason to think the downward momentum is waning.

The daily chart of course shows more detail of the “secondary” price action from the weekly chart.  You can see where the mid-2017 to current trend line was broken and how we had a 12 cent rally off those lows, only to fail to a point where we now have a new low for the move and a life of contract low.  TOTAL Open Interest is at an all-time high record, which too may signal satiated positions.

As we approach the 2016 lows of $1.1335 and potentially the 2013 lows of $1.0415, I maintain that if the roaster is content with profit margins at these levels, extending coverage for another “tranche” of their coffee needs would be a sensible suggestion.

Supply:

Brazilian diffs continue to be flat.  Softening is expected for Q4 2018 differentials as new crop short covering is satisfied and farmers will be expected sellers into strength to keep up with 18/19 sales.  Brazil is in the market almost daily, but tend NOT to follow the price down and prefer to sell bounces.  Colombian farmers are still limited sellers and despite lower prices, differentials are little changed.  

I read an article today that one industry source believes there will be 6.6 Million bags of green coffee surplus for the current year.  Considering that global consumption is roughly 150 million bags per year, the surplus is pegged at roughly two weeks’ worth of roastings.  Something to think about.

Demand:

Roaster interest to extend fixations is apparent, but the beginning of summer, the end of school and the prime vacation time of year do present a less than vibrant market for the buy side.  Combine that with the lack of any hard push for prices to escalate supply and demand-wise, has many buyers nibbling or simply taking to the sidelines for now.

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The certified stock number has remained steady being within 50,000 bags of 2.0 million for the past three months.

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Once again, this outline is intended to promote thought and an exchange of ideas.  If you have an interest to share your point of view, please do not hesitate to call me.

Good luck,

                Fred Schoenhut

                Royal Coffee New York, Inc.

                (908) 756-6400

How Does Uniform Particle Size Affect Extraction? by Ana Mallozzi

Have you ever baked cookies or roasted vegetables but had uneven pieces?  The small pieces cook fast and start to burn, while the large pieces are left raw in the middle.  We can think of this analogy when we talk about grind uniformity and coffee brewing.

Brewed coffee is made up of soluble material that we extract from the roasted beans using water. These solubles are things like aromatic compounds, acids, fats, melanoidins and carbohydrates, all of which contribute to the aroma, taste and texture of coffee.  These solubles make up around 30% of a coffee bean. The rest of the bean is made up of insoluble carbohydrates, cellulose, and general plant material which will not dissolve.

Brewing a delicious cup of coffee requires a game plan. This is because the soluble material in coffee extracts from the grounds at different rates and not all those solubles taste good.  That is one reason why there are recommended grind sizes and recipes for each brewing method: it’s to help extract just the right amount. Through research dating back to the 1960s by E. E. Lockhart, extracting around 18%-22% of the soluble material from the coffee is usually ideal. We still use Lockhart's Coffee Brewing Control Chart today as a tool to dial in brewing recipies:

  Extraction  refers to how much soluble material was extracted from the grounds, and  Strength  refers to the amount of that soluble material present in the coffee sample, expressed by total dissolved solids, or “TDS.”

Extraction refers to how much soluble material was extracted from the grounds, and Strength refers to the amount of that soluble material present in the coffee sample, expressed by total dissolved solids, or “TDS.”

Back to our cooking analogy: having uniform pieces that will cook evenly is similar to having uniform particle sizes that will extract evenly.  However, because roasted coffee is brittle, it essentially fractures as it's being ground.  This causes some variance in particle sizes, resulting in some larger pieces, called boulders, and tiny coffee particles that almost look like coffee dust, called fines.  The cheaper the grinder is, the more it crushes the coffee beans into random size pieces, which will cause an uneven extraction.  The fines will extract faster, causing bitter flavors we associate with over-extraction.  The boulders will extract slower, causing sour and sharp flavors we associate with under-extraction.  

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The best way to curb uneven extraction is to use a high quality burr grinder, which skillfully grinds the coffee into a more uniform particle size, reducing the amount of boulders and fines.*  Many times, the grinder is overlooked, as people spend more attention on the brewing device.  Let’s just say you could have the most expensive espresso machine on the market, but if you have a cheap grinder, it will be basically impossible to pull a balanced shot. 

The Kruve Sifter

We wanted to experiment with how particle size affects the final beverage.  For this experiment, we used the Kruve coffee sifter. The Kruve has 2 screens that separate 3 chambers.  You can change the screen sizes depending on what grind size you want. The screens are a measured in microns (µ)

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Place all your ground coffee in the top chamber, shake the Kruve for 1:30 minutes, and boom: the boulders stay in the top chamber, your ideal grind size remains the second chamber, and the fines fall through to the bottom chamber.

 Boulders on the right, our ideal grind in the center, and the fines on the left. 

Boulders on the right, our ideal grind in the center, and the fines on the left. 

 Our nice uniform particle size post sifting! 

Our nice uniform particle size post sifting! 

Although sifting coffee grounds to separate particle sizes existed before, the Kruve is the first on the market with a reasonable price tag that is intended for coffee shops and home enthusiasts.  The Kruve can not only be used to create a uniform grind size, but it is also helpful in calibrating multiple grinders, as well as finding the right grind size for a brew method (they give recommendations for different brew methods!)


For our brewing experiment, we chose a medium roast of Guatemala SHB El Injertal.**  For both brews we used a 1:16 ratio of 20 grams of coffee and 320 grams of water.  We did a 25 gram bloom for 30 seconds, and then did a slow, continuous pour until we hit 320 grams. Here were the results:

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The largest difference between the two brews was the sweetness and body.  We tasted Brew 1 first and thought it was balanced, but the coffee seemed to open up when we tasted Brew 2.  The apple note in Brew 1 changed to candy apple in Brew 2. The dark chocolate and heavy mouthfeel in Brew 1 mellowed out in Brew 2, which showcased more of the white sugar sweetness.  Overall, Brew 2 had more structured sweetness and flavor clarity.  

Conclusion: By removing the fines and boulders and creating a uniform particle size, we were able to achieve a more even extraction.  This is evident by our SCA score, tasting notes, our TDS reading, and our calculated extraction percentage.*** However, we still enjoyed Brew 1, and we're sure individual coffee drinkers would have their own preferences between the two!

We will be using the Kruve more in the future, so stay tuned!  If you are interested in the Kruve for your shop or for yourself, please do not hesitate to reach out to us with any questions : Education@royalny.com. 

Lastly, we partnered with Kruve so we could offer our customers a 10% discount on the Sifter Six, Twelve, or Twelve + XL.  Just use the code royalny at checkout: www.kruveinc.com


NOTES:

* There are deeper conversations being had about particle sizes contribution to a beverage in the coffee industry which we are not addressing in this blog post.  This blog post is an introduction into why general uniform particle size is important for extraction.

** Guatemala SHB HHT El Injertal Rainforest certified.  NJ : 101 bags, Ref#33095

***we got our TDS reading and extraction percentage by using a refractometer and VST Coffee Tools software

 

 

 

Las Lomas Project: Exclusive High-end Macro Lots from Costa Rica by Joe Borg

By Joe Borg and Dan Loughrey

Royal Coffee New York and Costa Rica

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Royal Coffee New York has sourced coffee from three main regions in Costa Rica for years; Tarrazu, the Central Valley, and the West Valley. There have been large lots and small lots, from full containers to very small single-producer micro lots. We’ve been very happy to work directly with producers, and consider them not only partners, but friends as well. Overall, this year we've been very happy with our arrivals from Costa Rica. The challenge over the last few years that we've run into has been bridging the gap between larger macro lots and the micros, and finding a quality level that everyone in the supply chain is happy with. The Las Lomas project was started to address that issue.

Behind the Scenes of Las Lomas

To put together such a project, we needed to work closely with a local partner we knew could deliver a traceable, high-scoring “macro” lot. Coop Naranjo was the logical choice. The Coop has been around since the 1960’s, has a large network of producers, and is well-situated to guide the production of superior-quality coffee. In addition, Royal NY has a long history with Coop Naranjo dating back more than eight years. Through close cooperation with Coop Naranjo, we were able to design a program to source traceable, high-end lots of coffee from the West Valley in a way that was inclusive to all members of the coop and paid a price premium for superior harvesting and preparation. 

Traceability was key. Given the increasing demand to know where coffee comes from down to the individual producer in many cases, there needed to be constant, consistent conversations between the individual producers and the Coop that would allow for important information to be relayed and assure the best possible deliveries of fully ripe cherries for this project.

To ensure quality, inspections would be done at every point in the production process. Agronomists would be sent to the individual farms to check maturation levels of the coffee trees at each participating farm, guaranteeing that cherries would only be harvested at the peak of ripeness. Further inspections would happen at the mill throughout processing, with feedback given to the producers as needed.

Of course, if you produce great coffee, you should be paid fairly for it. Since the standards (and labor costs) for this coffee are higher than what’s normally expected, a price premium was placed on the Las Lomas lots to encourage the highest possible quality. The project was open to all members of Coop Naranjo with farms between 1,300 and 1,700 meters above sea level, and offers an excellent opportunity for new producers to access new markets. Allowing all members of the Coop to join the project incentivizes the production of excellent coffee now, and into the future.

Arrivals

We've cupped through six different washed offerings from a specific Loma or mountain range that was identified by the coop to produce higher quality coffee in Naranjo. We've selected three specific areas within that mountain range. Each of these lots are named below for their location; Canuela, Lourdes, and San Juanillo. Despite all of these coffees being from one specific mountain range in the West Valley, they each bring something a little different to the final cup. 

Please note that these coffees are offered in less than full container loads, and are in short supply. Please be sure to contact your trader if you're interested in carrying any of these coffee or want more information.

Preshipment cupping notes include: