PERU — MID-SEASON UPDATE

OUTLOOK

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 lower growing 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.

COFFEE PRICES

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.

YIELDS

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%.

EXPORTS

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.

TALKING POINT

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.

TRAVEL

Roaster and trade visitors have often been put off Peru by the amount of road travel required to get to the coffee areas. We see some change here. Road travel gradually improves with newly paved areas. For the north, a new direct flight from Lima to Jaen starts (we hope) in September. Two of the leading coops in the area are building their mills close by. Sound planning! Central Peru is still best accessed by land in my view, though there is a flight that takes you more or less half way. However, I like land travel, not least for the stunning scenery. If you have time and want some rest, break up the journey in Tarma. Or take the night bus. 180 degree reclining seats and surprisingly good wifi.

Matt Horsbrugh

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