Coffee sales improve
Published:Friday | December 23, 2011 | 12:00 AM
Avia Collinder, Business Writer
With rapidly disappearing inventory and near certainty that next year's crop will be almost 30 per cent smaller than previous years, the Coffee Industry Board (CIB) says the price fetched by the Jamaican beans continue to average a steady US$25 (J$2,160).
At the same time, volume sales are ticking upwards, the agency said.
Director General of the CIB, Christopher Gentles, told the Financial Gleaner that 80 per cent of the projected exportable coffee has already been sold for the 2010-11 crop, and there are orders within the system for at least another 12 per cent of the coffee inventory.
"Therefore, the pace of sale is significantly better than last year, and may be due to some of the marketing efforts that have taken place," he said.
"So the significant portion of the 2010-11 crop has already been committed. This means that the portion of unsold inventory is less, and this will give coffee dealers a greater confidence and ability to pay a better price."
Currently, the price for non-premium Jamaica Blue Mountain (JBM) coffee is around US$20.76 (J$1,785) while for premium JBM No 1, the price is averaging US$25.30 (J$2,190).
Gentles states that the industry will be having a significantly smaller crop this year.
"We suspect that the JBM crop may be 20 to 30 per cent lower than the crop for the last year, and the high mountain crop will be significantly contracted as well."
This knowledge, in addition to coffee board advisories to buyers that farmers are being negatively affected by low farm-gate prices, have pushed sales and farm-gate payments upwards.
Farmers will now be receiving J$2,000 per box, compared to $1,500 and $1,200 made as first payment in 2010. Each box is equivalent to about 4 kilogrammes of beans.
It is expected that all farmers will receive a payment within 10 days of delivery.
"This will assist with the cash flow needs of running the farm, as fertiliser and fuel prices have risen significantly in the past two years," Gentles said.
In normal times, designated as pre-recession, the CIB would at this time of the year be concluding contracts for the sale of the next crop.
Positive outlook
The coffee board is indicating that with less than 20 per cent of last year's inventory on hand and with the quickening of take-up in the second half of 2011, the outlook is positive.
However, with regards to sales to Japan for the 2011-12 crop, the CIB is still awaiting confirmation from buyers.
Pre-recession, up to December 2008, Japan bought as much as 85 per cent of the local crop, with an average 10 per cent going to Canada and the United States and much of the remainder to Europe.
Less than one per cent was consumed locally.
Noting significant increases in the price of both premium and non-premium coffee on local shelves, the CIB head said coffee was more expensive because of the energy-intensive process of roasting coupled with significant movements on the NYSE commodities index for non-premium coffee.
"The opportunity cost for exportable Blue Mountain coffee is a minimum of US$10 per pound, and the roaster loses 20 per cent during roasting," said the coffee board head.
"After handling, packaging, increased marketing expenses and overheads, and a reasonable return which may total US$5 per pound particularly for smaller roasters, one can see that delivering a very high calibre product consistently to the local market is not an easy affair."