Reasons for the Decline in Yunnan Coffee Bean Prices_2018 Yunnan Coffee Bean Purchase Prices_Are Yunnan Coffee Beans Expensive

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Yunnan Coffee Bean Prices Keep Falling

Since this year's Yunnan coffee purchasing season began, prices have continued to slide, hitting coffee farmers hard. We therefore dug into the situation at the origin and visited companies to find the reasons behind the sustained decline.

1. International Coffee Futures Keep Falling

The US ICE Intercontinental Exchange coffee futures market is the world's largest trading and delivery center for coffee beans and sets the direction for global prices. Yunnan coffee bean trade prices are generally set at a 10% discount to the US ICE coffee futures price.

Since July 2017, the US ICE coffee futures index has fallen steadily, putting serious pressure on Yunnan coffee bean prices. Trade in Yunnan beans can only follow the futures market down.

Solutions:

1) The domestic Zhengzhou Commodity Futures Exchange should launch coffee futures as soon as possible, giving farmers and companies a hedging tool to lock in coffee bean prices and risks in advance.

2) The three major domestic spot coffee exchanges should get onto a sound footing quickly and build trading platforms that link spot and futures, enriching the trading options available to farmers and companies.

2. Market Expectations of a Big Brazilian Crop

Brazil's agricultural forecasting agency, the National Supply Company (Conab), stated that Brazil's total coffee production this year (including Robusta) will grow by 30% to a new record high.

Brazil, which accounts for one-third of global coffee bean production, has again signaled a 30% increase in output this year, which unquestionably adds to global supply. With demand not growing significantly, the market has reason to expect lower bean prices.

Fortunately, June brings the Brazilian harvest. Under the common market principle of "buy the expectation, sell the fact," coffee bean prices may find some room to breathe.

Solutions:

1) Large volumes of Brazilian commercial beans are the main competitors of Yunnan coffee. To beat them in a market economy, the only path is to improve quality and cut costs—though that strategy may be hard to achieve in the near term.

2) Step up research on coffee bean supply and demand, analyze the market relationship in advance, and prepare suitable strategies.

3. Starbucks and Nestle Greatly Reduced Purchases in Yunnan This Year

According to information channels at Coffee Finance Network (ID: coffinance), the two coffee giants Starbucks and Nestle bought only 60% of their usual volume of coffee beans this year. Nestle announced that it had already completed this year's purchases, meaning it will not make large-scale coffee bean purchases in China this year.

Reduced demand from the two giants, which together account for half of Yunnan coffee bean demand, has invisibly caused some panic in the Yunnan trade, pushing farmers who have long supplied Starbucks and Nestle to sell quickly at low prices to other traders. This short-term, concentrated, large-scale expansion of supply also gave traders a reason to hold purchase prices down.

Solutions:

1) At present, Yunnan's coffee farmers and companies mostly focus on planting and primary processing, while sales are controlled by traders, including Starbucks, Nestle, and local trading firms, so prices can only be accepted passively. Going forward, farmers can gradually develop direct customers, expand sales channels, and diversify their market strategies.

4. Commercial Bean Prices Fell While Specialty Beans Thrived

During this round of price decline, we also visited farmers and companies growing specialty beans, who said the impact on their prices has been limited.

Main reasons:

1) Specialty bean production is limited each year, and demand far exceeds supply, so specialty prices stay relatively firm.

2) Specialty bean farmers and companies generally have their own direct customers, keeping annual sales prices relatively stable.

This also shows that the commercial bean market has ample supply and inconsistent quality, making it more vulnerable to market shocks.

Solutions:

1) It is hoped that more Yunnan farmers and companies will move into growing and selling specialty beans. Although there may be a risky period of 2-3 years, in the long run the benefits still outweigh the drawbacks.

Other Noise

"Noise" here means factors that may influence bean prices but cannot be the deciding factor.

1) The California government ordered coffee companies such as Starbucks to place cancer warning labels on products. Although this looks alarmist to professionals, it is a fine opportunity for uninformed consumers and opportunistic capital markets to short coffee bean prices.

2) US-China trade tensions. Political friction between the two economies tends to give "conspiracy theorists" material: the argument goes that if trade ties worsen, American demand for Chinese goods will fall, and coffee beans may be affected too.

Finally, Two Questions for Everyone

1) Why could we not predict this decline in coffee bean prices?

2) Why can we only accept coffee bean prices passively?

These may be two of the hard problems the Chinese coffee industry has to overcome in the years ahead.

Yunnan Coffee Bean Brand Recommendations

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FrontStreet Coffee Recommendation

As this article shows, quality is the surest way for Yunnan coffee to hold its value, and FrontStreet Coffee's Yunnan selection reflects that. The FrontStreet Yunnan Small-Grain, from the Baoshan area, is washed and medium roasted, keeping a light plum acidity alongside soft nut and chocolate sweetness, so the cup stays balanced and approachable. For a more defined, structured version of the same terroir, the FrontStreet 2013 Natural Typica is sun-dried and medium roasted, with citrus and berry notes, a trace of fermented wine, caramel sweetness, and a creamy finish.

If you want to taste Yunnan in an espresso, the FrontStreet Black Cocoa Blend pairs Yunnan small-grain with Brazil Cerrado for a balanced Americano of nut and brown sugar notes and a latte with the smoothness of almond and cream. Choosing specialty-grade lots like these is one way drinkers can help reward the quality that keeps Yunnan coffee competitive.