Brazil Origin Report: Sourcing Specialty from the Land of Commodity by Andrew Blyth

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Brazil has, and always will be, the land of commodity coffee. With over 60 million bags of coffee grown in 2018, it’s also the largest coffee-producing country on the planet. Though much of the country’s production falls into the mechanically-harvested, commercial-grade category, a new generation of pioneering coffee producers is out to shift the conversation and produce some truly excellent specialty coffee.

A little knowledge of the situation on the ground goes a long way. Coffee in Brazil is a good business; producers are part of a sophisticated market system that provides agronomic assistance, market education, and a ton of selling opportunities. Producers of every size have a working knowledge of the “C” market, how the Brazilian Real is performing against the US dollar and the Euro, and the changing prices of internal differentials. It’s not uncommon to see producers hold onto their coffee until they can sell at the most advantageous time, knowing full well that they can sell to any number of buyers that want their coffees. All the producer needs to do is walk into one of the buyers or exporters lining the streets, submit a sample for quick evaluation, and get a price. After shopping around a bit, they then sell to the highest bidder.

Producing coffee in Brazil is an exercise in efficiency. A comparably flat topography relative to its coffee-producing neighbors allows for speedy mechanical harvesting that minimizes the labor required for a harvest. Strict labor laws make harvesting expensive, so mechanical harvesting allows producers to keep their coffee prices competitive. On larger farms, or fazendas, these mechanical harvesters drive up and down manicured rows of coffee trees stripping coffee as they go along with as few as 3 workers per machine. Smaller farms called sitios may rely on individual workers to use handheld machines to strip individual branches from a tree at as time. Drying is done on large patios in thick layers, with a mechanical dryer used to bring the final moisture to the desired 10%-12%. Density tables and screens allow for post-harvest sorting, an important step in quality control given the less-selective picking process. While coffees are generally well prepared, the process doesn’t exactly speak to elevated quality. That’s where the change comes in.

In 2014, Royal New York began working with an inventive, specialty-focused exporter named Legender Coffees. Legender is owned and operated by a Brazilian native, Demilson Batista, and opened its doors in 2013 with a focus on smaller farms at a higher-than-normal altitude with the potential to produce an above-average product. While certainly not the first of its kind, Legender’s choice of region and dedication to the idea of paying a higher premium for high quality has separated them from other specialty-focused exporters.

Legender works predominantly in the towns of Machado and Poço Fundo with a number of storefront offices staffed with agronomists, sample roasters, and expert cuppers. These regions have a higher altitude (usually around 1,100-1,400 meters) than the norm, which can be as low as 700 meters. Legender staff evaluates samples as they arrive from producers, roasting and cupping them the same day. While the QA process is going on, Legender agronomists talk with the producers about their farms, production methods, and harvesting techniques. If a lot stands out, the coffee is purchased, a premium above the market is paid, and Legender’s chief agronomist is dispatched to the farm for further connection and info gathering.

This system and our common drive to source the best coffees possible are what drew Royal New York to Legender and provided the basis for our partnership. Our partnership gives us the benefit of right of first refusal for all top-quality lots, allowing us to bring on only the best of the best year after year. Numerous visits from Royal New York to Brazil and from Legender meeting us here in New Jersey have allowed us to build up an inventory of small Sitio offerings for producers with an impressive farm pedigree and excellent preparation methods. Current and upcoming lots include:

The work doesn’t stop here. During our latest visit this past October, we selected 5 individual producers to pilot a quality-focused specialty coffee project. Our goal is to provide a 100% ripe cherry offering with drying done on raised, screened beds as opposed to the more common densely-packed patios. These lots won’t be reaching us until the 2019 harvest, but we’ll be keeping you up to date with farm data, photos, and videos of these new micro lot offerings.

Until then, we encourage you to contact your trader so we can discuss the offering that’s best suited to you. We’ve found quality in the land of commodity and couldn’t be more excited to share these new specialty coffees from Brazil. Prices for these current lots may be a little higher than the conventional Brazilian offerings (as you’d expect), but they’re certainly a bargain for what they bring to the table.

Careers at The Lab: Lead Instructor by Education RoyalNY

Who we are

Royal New York is an independent family-owned company founded in 1994 which sources and provides specialty coffee, tea and focused education to roasters, tea houses, cafes, and aspiring professionals throughout the United States. “The Lab”, opened in 2016, is our modern education facility providing an all-encompassing curriculum of coffee and tea education primarily geared toward professional development. RNY is a diverse and exciting company focused on the growth and innovation of the specialty coffee and tea markets. Royal is looking for hard working, independent thinkers to contribute to our growing staff of coffee, tea and education specialists.

Who you are

As the Lead Instructor for The Lab you will be a seasoned educator in various areas of specialty coffee & tea. The Lead Instructor will be knowledgeable in roasting, barista training, espresso extraction, cupping and preferably a Q-grader. You have high energy, are very detail and schedule-oriented, a strong public speaker with a get it done attitude. Teaching at The Lab will provide you the opportunity to expand your knowledge and exposure of the specialty coffee & tea industry while contributing to its advancement through education.

Responsibilities

• Oversee day to day operations at The Lab and guide its progress and development.

• Develop and teach educational content for the specialty coffee & tea communities.

• Manage the class schedules, attendee’s agenda and supportive staff at the Lab.

• Participate and teach at industry conferences and events for The Lab.

Requirements

• Hard working, engaging, enjoy speaking with new people in a business environment.

• Strong organizational skills with high attention to detail.

• Self-motivated with a professional attitude and desire for success.

• Proven experience as an educator with references (SCA pathway experience is a plus).

• Roasting and Barista experience.

• A college degree.

• Capable of working some weekends.

Details

This is a full-time salaried position with company paid medical benefits. For consideration, please email your resume to employment@royalny.com

Careers at The Lab: Assistant Educator by Education RoyalNY

Who we are

Royal New York is an independent family-owned company founded in 1994 which sources and provides specialty coffee, tea and focused education to roasters, tea houses, cafes, and aspiring professionals throughout the United States. “The Lab”, opened in 2016, is our modern education facility providing an all-encompassing curriculum of coffee and tea education primarily geared toward professional development. Royal New York is a diverse and exciting company focused on the growth and innovation of the specialty coffee and tea markets. Royal New York is looking for hard working, independent thinkers to contribute to our growing staff of coffee, tea and education specialists.

Who you are

As the Assistant Educator, you’ll be you will be passionate about coffee, tea, and people. Having experience in various aspects of specialty coffee and tea with a desire to collaborate and share knowledge would make you the ideal candidate. The Assistant Educator could be knowledgeable in the barista arts, espresso extraction, barista training, cupping, sample roasting, production roasting or tea tasting. Working at The Lab will provide you the opportunity to expand your knowledge and exposure to the specialty coffee and tea industries while contributing to their development through education. You will need to have high energy, be very detail and schedule-oriented with a hard working, get-it-done attitude.

Responsibilities

• Assist in the delivery of coffee and tea classes hosted at The Lab as assigned by the Director of Education

• Organize the class schedules, attendee’s agenda and setup/breakdown of all classes.

• Collaborate with the Education and Marketing Specialist to publish product information in written and digital media as required;

• Participate in industry conferences and events for The Lab.

• Aid in the sampling, roasting and cupping of coffee and tea (training provided).

Requirements

• Hard working, engaging, enjoy speaking with new people in a business environment.

• Strong organizational skills with high attention to detail.

• Self-motivated with a professional attitude and desire for success.

• Capable of working some weekends.

Details

This is a full-time salaried position with company paid medical benefits. For consideration, please email your resume to employment@royalny.com

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)