A look at last year’s prediction

A look at last year’s prediction

I used to do annual predictions, and then I stopped but apparently I couldn’t quite give up the habit as last year I made some predictions about the C-market, and the coffee market in general in 2014.

So let’s have a look and see where I was right and (as usual) wrong:

We’re going to see less coffee from Central American producers ongoing.

This is, so far, looking to be fairly accurate. Crop years get confusing (we’re going to be receiving the 2014 crops of Centrals this year…). Data comes from the ICO: a

Central Production Data

We saw a further decline (13.4% decrease, down nearly a quarter on two years before) in Central American coffee primarily due to rust. There has been some recovery – but this year’s crop figure will give better insight into whether we lost some producers along with the drop in yields.

Hopefully the demand from speciality will drive the prices for high quality coffees up, ideally to the point where growing good coffee is sensible and sustainable.

Hard to speak across an industry. This was certainly true for the prices paid at work.

We’re going to see more coffee from Colombia. It seems like the rust resistant varieties are starting to kick in, and Colombia’s production is up.

This has been borne out – both Colombia’s production and its exports are up. More data from the ICO:

Screen Shot 2015-01-15 at 12.33.38

You can see from the previous table that Colombia’s production has been back above 12 million bags for the last couple of years, after the drop caused by rust. Notable is the amount of coffee exported which was jumped quite dramatically, despite a 2% increase in production there was an 18% increase in exports.

Brazil’s production is going to be sufficiently large that it will continue to squash the commodity price.

This where it all falls down. Brazil’s crop wasn’t as expected, the drought making news around the world. Looking at the traditional cycle of crops this should have been a big crop year, a record crop year in fact. It wasn’t:

Screen Shot 2015-01-15 at 14.50.11

You can see from the chart that this was a year that bucked the on/off cycle trend. As a result the market was a lot more volatile in the last twelve months and prices went back up. Predicting weather is something I am not good at, nor are humans in general beyond a relatively short timeframe. Whether we want to bring climate change into this as a potential factor may be worth considering, as this was the driest period on record since they started recording 84 years ago.

I haven’t seen much in the way of predictions for next year’s crop yet, and I have no idea how much other countries are looking to produce. It does seem that the expected consumption for 2013 pretty much matches production, and with an annual growth rate of 2% it also seems likely we’ll have a year in 2014 in which more coffee was consumed than produced.

I also made a few other predictions:

Supermarket/grocery store coffee is going to remain pretty cheap. I would expect it to increase with inflation/cost of living but to look increasingly cheap compared to speciality.

Not successful here either, or maybe a little bit so. Smuckers, a large US company, put up their prices(9%) and saw a large decrease in sales. Kraft also put up their prices (10%), and the market saw a shift to cheaper coffee. Which means cheaper coffee was at least sufficiently plentiful.

I don’t know of an index that compares typical specialty prices to commoditised coffee prices at retail (we’d have to define speciality first I suppose) but I don’t think any serious speciality company decreased their prices this year (evidence to the contrary welcome!)

Wholesalers of lower quality coffee will once again be able to leverage free-on-loan equipment more aggressively, as it will be easier to hide the margin necessary in the price of the coffee.

I did see a little more of this in London. I continue to see free equipment as a way to bribe a business into overpaying for low quality coffee. I don’t think it is smart long term business.

Roasters, and coffee shops, will have some decisions to make. With the gap between speciality and commodity likely to widen then the choices may be to go premium, to go mass market or to try and bridge both.

In truth this is probably a low priority decision to make for many cafes. A more important decision is probably whether things like multi-roaster purchasing/guest espresso are as profitable and worthwhile as they’d like them to be. I’m hoping to manage a coherent and ideally neutral post on the subject at some point soon.

I don’t think we’ll see the wider industry embrace certifications again.

Maybe I am just not talking to the same people but I feel that 2014 was a year wherein no-one really talked about certifications. Consumers, cafes, roasters, importers – I just didn’t really hear anyone say anything about them. I should probably track down some sales data on this…

So – a mixed bag of predictions and speculation. Make of it what you will. For the sake of being complete here’s a quick chart showing the C-market prices in 2014:

Screen Shot 2015-01-15 at 15.11.56

I don’t really feel in a predicting mood for 2015, but that may change later in the month – who knows!

  1. This data comes from the September newsletter here: pdf. For their free newsletter keep an eye on this page.  (back)