In the main (and based on limited viewing of coffee farms) it looks like volumes are more or less in line with 2015 crop, maybe a small increase. Initial expectations were of an increase of 10–15%, but low yields in lowergrowing areas (due to excessive broca) have impacted this. Diseases appear to be under control, but with roya still evident in central Peru along with some other other issues. We are conservatively anticipating a 4 million bag production, of which 3.1million exportable for the 2016/17 season.
Local market prices seen as satisfactory for farmers with anecdotal comments that a price equivalent to 145.00c/lb green FOB is ok for producers, providing the farm size is not too small (say below 3 hectares) and that they are able to implement effective fertilisation and crop renovation. As ever, seasonal harvest pickers are in short supply, increasing labour costs and risking inability to properly harvest all coffee.
Moving into August good volume of improved quality coffee is anticipated to flow from the medium to higher altitudes in the north. The central harvest is more or less at an end. Yields are around 1000kg/ha (green coffee) in the north, compared to 650kg/ha in centre and 500kg/ha in the south. Parchment to Exportable green yields above 70%. Some really nice microlots observed from Cajamarca region with yields closer to 80%.
Overall, the feeling is that many exporters have been behind schedule on their projected sales for the season. July export figures from the Ministry of Agriculture (out later in August) will confirm how much volumes have picked up. Cooperatives also reporting slower than anticipated sales. As the flow of coffee improves, and with sellers eager to find markets, we’ll see over next couple of months if diffs ease some more.
Concerns continue to be expressed around the lack of transparency for coffee from certified sources. Certainly, the huge growth in FLO certified cooperatives over the past couple of seasons is a concern. Two things stand out here — firstly, the ability of private buyers to set themselves up as cooperatives, with an absence of adequate accountability to ensure the flows of income back to producers. Secondly, new cooperative registrations with FLO over the past couple of seasons have increased the supply of FT and FTO far in excess of any global demand increase. This glut has inevitably led to downward price pressure on the FLO Organic minimum export price level of 190.00 FOB.
NEW GOVERNMENT, OLD POLITICS
Outside coffee, the main talking point is the new government taking office. Pablo Kucsynski (nicknamed PPK) won the presidential vote back in June by the narrowest of margins on a pro-business, anti-corruption ticket. Don’t expect too much change — his party has only 18 of the 130 seats in Congress.