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

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Continuous Decline in Yunnan Coffee Bean Prices

Since this year's Yunnan coffee purchasing season, Yunnan coffee bean prices have continued to fall, causing coffee farmers to suffer greatly. For this reason, we have深入产地的根源 and visited enterprises to find the reasons for the continuous decline in Yunnan coffee bean prices.

1. Continuous Decline in International Coffee Futures Prices

The US ICE Intercontinental Exchange coffee futures is currently the world's largest coffee bean trading and delivery center, playing a guiding role in global coffee bean prices. Yunnan coffee bean trade prices are generally discounted by 10% based on the standard of US ICE Intercontinental Exchange coffee futures prices.

Since July 2017, the US ICE Intercontinental Exchange coffee futures index has continued to decline, putting serious pressure on Yunnan coffee bean prices. Yunnan coffee bean trade can only passively follow the continuous decline in coffee futures prices.

Solutions:

1) The domestic Zhengzhou Commodity Futures Exchange should launch coffee futures as soon as possible to help coffee farmers and enterprises choose hedging financial tools in the financial market to lock in coffee bean prices and risks in advance.

2) The three major domestic spot coffee exchanges should quickly get on the "right track" and build trading platforms to achieve "period linkage" and enrich choices for coffee farmers and enterprises in trading models.

2. Market Expectations of Brazil's Bumper Harvest This Year

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

Brazil, which accounts for one-third of global coffee bean production, has once again been exposed to have a 30% increase in coffee bean production this year, which undoubtedly adds momentum to global coffee supply. While market demand has not grown significantly, the market has reason to be optimistic about the decline in coffee bean prices.

However, fortunately, June will enter the Brazilian coffee bean harvesting season. Under the guidance of the common financial market strategy of "buy expectations, sell facts," coffee bean prices may find a breathing opportunity.

Solutions:

1) Large quantities of Brazilian commercial beans are the main competitors of Yunnan coffee beans. To defeat them in the market economy, the only way is to improve quality and reduce costs, but this strategy may be difficult to achieve in recent years.

2) Increase research on coffee bean supply and demand, achieve market supply and demand relationship analysis in advance, and prepare corresponding market strategies.

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

According to relevant information channels of Coffee Finance Network (ID: coffinance), the two coffee giants, Starbucks and Nestlé, only purchased 60% of the usual amount of coffee beans this year. Among them, Nestlé announced that it has completed this year's purchase quantity, meaning it will not make large-scale coffee bean purchases in China this year.

The reduction in demand from the two coffee giants, which account for half of Yunnan coffee bean demand, has invisibly caused certain panic in Yunnan coffee bean trade, forcing some coffee farmers who have long supplied Starbucks and Nestlé to quickly sell coffee beans at low prices to other traders. However, the short-term, concentrated, and large-scale emergence of coffee bean supply expansion has also caused traders to suppress purchase prices.

Solutions:

1) Currently, Yunnan coffee farmers and coffee enterprises generally focus on planting and primary processing links, while market sales are controlled by traders, including Starbucks, Nestlé, and local trading enterprises. Prices can only be passively accepted. In the future, direct customers can be gradually developed, sales channels increased, and market strategies diversified.

4. Commercial Bean Prices Fell, While Specialty Beans Thrived

In this round of Yunnan coffee bean price decline, we also visited some specialty bean planting coffee farmers and enterprises, who stated that the impact on their prices is limited.

Main reasons:

1) The annual production of specialty beans is limited, and market demand far exceeds supply, making specialty bean prices relatively firm.

2) Specialty bean coffee farmers and enterprises generally have their own direct customers in sales channels, making annual sales prices relatively stable.

This also reflects from the side that the commercial bean market has ample supply and poor quality, making it more vulnerable to market shocks.

Solutions:

1) It is hoped that more Yunnan coffee farmers and enterprises will engage in the planting and sales of specialty beans in the future. Although there may be a risk period of 2-3 years, from a long-term perspective, the benefits still outweigh the disadvantages.

Other Noise

Noise refers to some factors that may affect the decline in coffee bean prices but cannot be the determining factor.

1) The California government ordered coffee companies such as Starbucks to put cancer warning labels. Although this seems somewhat alarmist to professionals, to uninformed consumers and opportunistic capital markets, this is an excellent opportunity to short coffee bean prices.

2) China-US trade war. Americans have shown a provocative stance, and Chinese people have also shown a responsive stance, so the next ones to take the stage must be "conspiracy theorists." They love to use some topics to fabricate stories: if the trade war opens, Americans will definitely reduce demand for Chinese goods, then coffee beans may also be affected.

Finally, We Want to Ask Everyone Two Questions

1) Why couldn't we predict this coffee bean price decline?

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

Perhaps these two are also difficult problems that our Chinese coffee industry needs to overcome in the future.

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