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4391 views March 1, 2014 posted by Maja Wallengren

Greetings From Dubai — A Market In Despair From Seed To Cup And A Growing World Deficit

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FEB 28 (SpillingTheBeans)–Greetings from Dubai in the heart of the Middle East, where the oldest of the coffee world and most ancient of coffee culture meets the new world. But a few quick words on the latest from SpillingTheBeans and the latest on the rapidly growing deficit in the market.

Dear Followers, it’s been an exciting week for SpillingTheBeans, for the first time participating at GulFood here in Dubai which has been an incredible experience. This is where the cradle of the spread of coffee from the origins in Ethiopia to the New World took place, with Dubai situated in the center of the ancient spice trade route from India to Zanzibar and where coffee culture has existed from the earliest of beginnings in the Arabian world. But this fantastic history aside, today’s coffee market is in a state of despair and there is no signs of this outlook improving anytime soon.

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The market continues to be concerned about the growing impact on the new 2014-15 harvest from the ongoing drought in Brazil and this is rapidly creating a growing deficit everywhere else in the world. Please bear with me for a few days and I promise I get back with more insight news on what is going on behind the markets these days. But as of now, prices have continued to strengthen and this is at least bringing a little bit of good news to coffee producers, who for most of the past two years have been growing coffee below the cost of production. While the current higher prices are more or the less in line with costs of production these prices will – however – not bring production back on track anywhere in the near future, so traders and roasters should not think the crisis is over.

The very large percentage of farms are in very bad shape and yields are across the world with very few exemptions at record lows of only 2-3-5 quintals, or 100-pound bags.

With the average size of land at between 0.50 hectare to a maximum of 1 hectare for over 90 percent of small-holder producers worldwide it’s not a complicated equation to do the math and see that per household family income from coffee EVEN with the latest rise in Arabica future prices are somewhere between $350 and $750 for the family’s ENTIRE coffee crop. This is NOT going to bring back investment in crop husbandry, except for a part of the medium to larger sized farms, and if the Brazil situation persists and panic grows in the market, prices could soon become more volatile than ever before.

Please stay tuned for my upcoming reports on the market, price trends, the supply-demand balance and fascinating insight and pictures into the amazing coffee history here in the Middle East.

Thanks for your supportheart

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6 Comments

  • Dear Maja,

    I’ve been following your views since a year & 1/2 ago! An excellent one, in deed! Thks.

  • Yesterday, I called a farmer to buy his 15,000 lbs of coffee that he normally produce yearly. Unfortunately, he had sold it when the prices were $1.16 per pound to a large coffee buying mill Altantico in Nicaragua. As the most expensive part of coffee farming is the harvest, he had to sell his coffee to pay the cutters/harvesters. If he could only hold on to it, he would have had a good profit. But instead, he lost money from the harvest, and even more unfortunate, the big coffee buying groups are profiting from the farmers losses. – Scott

    • Hi Scott,
      Am currently based in Kampala Uganda,we produce mainly Robusta and Arabica coffee.
      We are currently looking for potential buyers of the product.
      Do you have some market leads.
      I can send some samples in case of a positive response.
      Regards,
      Michael
      michaelambenge@gmail.com

  • dear Maja, your analysis and speculation is awesome for someone addicted with all part of coffee beside the drink. i really appreciate what you do and how you do it. gracias!!

  • Dear Tesfaye and Fasil, thank you so much for your very kind comments, it’s much appreciated. A lot of people in the market place have in the last year liked to brand me as “bullish” and comment that I am being overly pessimistic about the multiple issues that are affecting the supply chain — I don’t believe it’s about being either bullish or bearish, but simply about being realistic! Scott, thanks for yet another great comment, although it’s a very sad a real perspective of how difficult it is for the producers to take advantage of high prices. More comments and special analysis pieces coming up soon 🙂 Maja

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