Brazilian production decline trading companies bet on Chinese coffee beans

According to the Wall Street Journal website on October 29th, commodities trading company ED&F Man Holdings Ltd. Volcafe, a subsidiary, said on the 28th that it had signed an agreement with China Simao Arabica Star Coffee Co., Ltd. (Simao Arabicasm Coffee Company) to set up a joint venture to buy and sell coffee beans from Yunnan.

According to the report, China accounts for less than 1% of global coffee production, but the global limited supply of Arabica coffee and the resulting price rise have attracted investment to China. Big coffee companies such as Nestl é and Starbucks have invested in farms and growers to ensure the supply of mild Arabica beans.

The price of Arabica coffee beans has risen 73 per cent so far this year amid a drought in Brazil, the world's largest grower of Arabica coffee beans, and concerns about production next year amid persistent dry weather.

China's mountainous Yunnan province mainly produces Arabica coffee beans, which are used to make boutique coffee. Arabica coffee beans are usually found on the steep tropical slopes of Latin America and Africa and are picked by hand, while Chinese Arabica beans are relatively rare. Yunnan Province is adjacent to Vietnam, the world's largest grower of Robusta coffee beans.

Yankees van der Wilder, global head of commodities at ED&F MAN, said Arabica beans with mild Chinese flavors are still relatively new in the global coffee market, but with increasing concentrations, they are rapidly being accepted by coffee lovers around the world.

Analysts say that if China increases production, it could reduce the world's dependence on big Arabica coffee growers such as Brazil and Colombia.

'it 's not a bad thing if there's an alternative to Brazil, 'said Jack Scoville, vice president of PriceFuturesGroup in Chicago.

Furniss, director of business development in Asia for Volcafe, said the new company Yunnan Volcafe Ltd. Coffee beans will be exported to overseas roasters.

Furniss said the Arabica beans were priced 8 to 10 cents lower than the benchmark futures contract price on the ICE Futures Exchange.

However, there is also domestic demand for Arabica coffee beans in China. Asian buyers from China, Japan and South Korea have been active buyers in some of the world's top online sales of coffee beans. Sales of bagged coffee in these countries are growing at least twice as fast as those in the United States, according to market research firm Euromonitor.