Recap #15 | August 13, 2020

 
 

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Last week, Arabica coffee futures rose to US$1.27 per pound, up from this year’s low of US$0.92 per pound in June. But there’s little cause for celebration: the rise in price can be attributed to a shifting relationship between currencies. Although coffee is traded in US dollars on the Intercontinental Exchange, local production costs of the biggest coffee producer are measured in Brazilian reales. As a result, coffee prices tend to rise when the real strengthens against the dollar, as it has been doing for the past few weeks. The interplay of exchange rates adds a layer of complexity to C market price, especially when other currencies don’t have a similar relationship with the US dollar. A drop in the real against the dollar usually means the dollar goes further in covering Brazilian farmers’ costs. However, if another coffee producing country’s currency remains stable, the dollar will be worth the same in worker wages and fertilizer as it's always been—but the producer will receive less.

One of Beirut’s first specialty coffee shops is seeking support to rebuild following a devastating explosion at the Port of Beirut last Tuesday, August 4. Located within 2km of the blast site, Kalei Coffee Co.’s Mar Mikhael coffee shop first opened in 2015, preserving a 1950s house abandoned in 1984 during Lebanon’s civil war. Kalei Coffee, like many businesses in Beirut, had just survived a two-month closure during Lebanon’s COVID-19 lockdown. Across social media, the Kalei team confirmed that they all survived the explosion but acknowledged that the damage to the shop is considerable. The message continues: “The thought of rebuilding is definitely not our first instinct, because we reject the idea that our people should continue to accept to be called ‘resilient’ at the price of starting over and over again this way.” However, messages of support have encouraged the team to start a fund to rebuild Kalei Mar Mikahel, with any donations beyond what’s required sent to a trusted, local NGO. 

Despite opening at a lowered base price to account for pandemic-related financial hardship, the 17th El Salvador Cup of Excellence Auction set a new price per pound record of US$23.53, nearly US$10 higher than the previous record set in 2017. The winning lot, a natural anaerobic process Pacamara from Roberto Samuel Ulloa Vilanova of Finca Divinia Providencia, received US$80.10 per pound, the second-highest price paid in the Salvadoran competition’s history. As with previous years, nearly 65 percent of this year’s top-scoring coffees were Pacamaras, a cross between the Pacas and Marigogipe varieties, grown primarily in El Salvador. While capable of producing exceptional cup quality, Pacamara is highly susceptible to coffee leaf rust, coffee berry disease, and nematodes. 

A recent survey by the nonprofit Hanns R. Neumann Stifung, or “HRNS,” suggests that COVID-19 will have a long term impact on the livelihood of smallholder families. The survey solicited responses from smallholder farmers across Indonesia, Ethiopia, Uganda, Tanzania, Brazil, Guatemala, and Honduras. Echoing other recent surveys by the International Coffee Organization and Caravela Coffee, the HRNS survey results suggest that the effects of climate change might be more difficult to manage for smallholders. The ongoing pandemic makes it difficult to access farm labor and resources used in coffee production like equipment and fertilizers, both of which are often used to mitigate the effects of climate change like drought and increased pest activity. According to the survey report, “farmer families face higher production costs at a prospect of lower revenues.” Given the C market’s continued volatility and the impact that currency exchange rates have on how far revenues might—or might not—stretch to cover farm costs, this is a grim prospect for smallholder coffee farmers everywhere. 

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Listen, RecapSCA Staff