Volcafe sets up a Chinese joint venture to participate in Yunnan coffee bean trade

Volcafe, a coffee business owned by commodities trader ED&F Man Holdings, announced on Tuesday that it had signed an agreement with China Simao Arabica Star Coffee Co., Ltd. to set up a joint venture to buy and sell coffee beans grown in southern Yunnan Province, hoping to help meet global coffee demand.

Although china accounts for less than 1 per cent of global coffee production, the global supply of small Arabica coffee beans is limited, and the resulting price increases make such investments in china profitable. Big buyers such as Nestl é and Starbucks have invested heavily in areas such as farms and growers to ensure the supply of small Arabica coffee beans with mild taste.

The price of Arabica small-grain coffee has risen 73% in 2014 after a severe drop in production caused by a drought in Brazil, a major grower, and the continuation of the dry weather has even made the market worried about the 2015 harvest.

Mountainous Yunnan Province, bordering Vietnam, a major grower of Robusta coffee beans, mainly produces small Arabica coffee beans that can be used as ingredients in many kinds of coffee. This variety is traditionally grown and hand-picked in tropical Latin America and Africa, and coffee beans from China are relatively rare in the market.

"China's mild-flavored Arabica coffee beans are still relatively new in the world coffee market, but the improved consistent performance means it will be more and more accepted by global coffee lovers," said Jan Kees van der Wild, global head of commodities at ED&F Man.

Some analysts point out that if China's production increases, it could ease the world's dependence on big producers of Arabica small-grain coffee beans such as Brazil and Colombia. "if you can diversify your supply relative to Brazil, I don't think that's a bad thing," said Jack Scoville, vice president of the Price Futures Group in Chicago.

Volcafe Asia Business Development Director Mark Furniss (Mark Furniss) said the joint venture, called Yunnan Volcafe Co., Ltd., will export coffee beans to coffee merchants outside China. He said the beans would be traded at a discount of 8 cents to $10 relative to ICE's benchmark contract price on the American Futures Exchange.

There is also a market demand for coffee beans in China. Asian buyers from Chinese mainland, Taiwan, Japan and South Korea have always been the most active buyers of the world's best coffee beans sold online. Sales of packaged coffee beans in these countries and regions are growing at least twice as fast as those in the United States, according to market research firm Euromonitor.

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