[Homeroast] WSJ article on old, stale coffee beans entering the supply chain

Phil Palmintere phil.palmintere at gmail.com
Wed Jun 15 14:54:40 CDT 2016


In case you missed it:  http://on.wsj.com/1VYgM0C an interesting article in
today's Wall St. Journal about old Arabica beans entering the
commercial/industrial market (think: vending machine coffee) because the
price premium for old Arabica over fresher Robusta has collapsed. 
***************
Before you take that next sip of coffee, consider this: Some of the beans in
your cup of joe might have been picked during the Bush administration.

Arabica coffee that had been stored away as markets cratered in 2013 is now
pouring out of warehouses, flooding the market with beans as old as nine
years.

Those beans, which are considered higher quality than the more bitter
Robusta type typically found in instant coffee, are coming out now because
they get cheaper the longer they sit. Prices for better varieties have come
down enough to tempt buyers who would usually be in the market for lesser
grades.

Coffee that sits for 121 days after being certified by the ICE Futures U.S.
exchange in New York loses half a cent a pound in value. The value of
three-year-old coffee gets cut by 35 cents a pound. Nine-year-old coffee is
discounted by $1.55 a pound, which would make it essentially free, as
Arabica coffee for July delivery on Tuesday closed at $1.35 a pound.

"There are some very old coffees that have been sitting around for years
that are going out the door," said Edgar Cordero, senior adviser on global
strategy for the Colombian Coffee Federation, an industry group.

https://si.wsj.net/public/resources/images/MI-CQ116_OLDCOF_9U_20160614163306
.jpg

According to exchange data, at the end of May, 18% of exchange-certified
beans were more than three years old, compared with 11% in May 2013. Several
coffee roasters said they wouldn't purchase beans that were more than a year
old because they lose their flavor.

Coffee buyers said the oldest Arabica beans are headed to bulk and
instant-coffee roasters, and ultimately to the companies that supply largely
institutional coffees that can be found at some hotels, schools and vending
machines. Many are expected to combine the older beans with newer ones or
roast them longer to mask the taste.

"You're not going to see this in your Starbucks," said Jorge Cuevas, chief
coffee officer at coffee importer Sustainable Harvest, based in Portland,
Ore. "It's mostly going to be in generic brands that you might get at an
institutional level."

As Arabica coffee's value deteriorates in storage, it becomes more
attractive to certain commercial buyers that typically favor the
lower-quality and cheaper Robusta bean, said Judith Ganes Chase, president
of commodities research firm J. Ganes Consulting LLC of New York.

In addition, droughts in the Robusta-growing regions of Brazil and
production delays in places such as Indonesia have pushed the price of
Robusta up 5.8% this year, which recently narrowed the gap between the two
varieties to less than 50 cents a pound. The gap had widened to more than 61
cents as of Tuesday.

Robusta for July delivery closed at $1,618 a ton on ICE Futures Europe on
Tuesday.

Some of the beans are so old that most lenders won't allow buyers to use
them as collateral, according to a person familiar with industry-lending
practices. Beans over two years old are typically assigned little or no
value, the person said.

The now-declining glut of stored coffee got its start in 2011. Futures for
Arabica coffee hit their highest price in more than three decades that year
at $3 a pound, boosted by limited supply and a new appetite in tea-drinking
emerging markets such as China. Overproduction followed, and the beans
arrived just in time for emerging-market growth to slow. By 2013, Arabica
futures prices had fallen to $1 a pound.

Producers stored their coffee rather than sell it cheaply. The average age
of beans sitting in coffee exchange-certified warehouses peaked at 853 days
in February 2015, up 80% from two years earlier, according to data from the
ICE Futures U.S. exchange. Producers are now beginning to unload that
coffee, reducing the average age to 648 days, ICE data show. That is still
an old bean, but the shrinking average age is a sign that the oldest are
leaving storage for the marketplace.

Inventory depletion is helping to bolster pricing, with Arabica up 6.6% this
year after touching a one-year high last week. Brazil, the largest coffee
producer in the world, is expected to have a record Arabica crop in the
2016-2017 marketing year but will need to use a larger amount of that crop
to supply its own population, according to the International Coffee
Organization, an intergovernmental body. The country exported so much coffee
earlier this year when prices were favorable that the country's
coffee-exporting organization said Brazil needed to dip into old stocks to
meet the nation's demands.

The difference between a one-year-old cup of java and two-year-old coffee
for discerning drinkers can be striking. Allie Caran, an educator at coffee
roaster Toby's Estate in Brooklyn, roasted two Brazilian coffees at a recent
tasting, one two years old and one from Brazil's most recent harvest.

Both were roasted that day, she said, but it was impossible to taste the
"graham cracker, sweet toffee and toasted hazelnuts" detected at the farm
where the now two-year-old coffee was grown. The coffee tasted like the jute
bag it was shipped in, she said.

"It reminds me of cedar. Or a toothpick," Ms. Caran said. "This isn't a
coffee we'd sell."

It is a coffee you can survive, however.

"Even if the beans get moldy, you're roasting them above 200 degrees Celsius
(392 degrees Fahrenheit), way above boiling water," said Bill Ristenpart, a
professor in chemical engineering and materials science and researcher with
the University of California, Davis, Coffee Initiative, a research and
educational program. "It kills everything."







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