Ukraine War Increases C Market Volatility, Worsens Supply Chain Crisis

Red Fox Coffee Merchants Q2 2022 Origin & Shipping Update

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As core issues from the last several quarters persist—snarled and effortful logistics, limited container availability, constrained shipping lines, domestic freight bottlenecks, elevated costs across the board, an elevated and extremely volatile C market, and the resulting global inflation hitting the most vulnerable the hardest—the Russian invasion of Ukraine has escalated all of those issues globally, adding more uncertainty, costs, and an increasingly unpredictable C market.

Combined with local shortages of coffee due to climate events, labor deficits, and cyclic down years for certain origins, price volatility has also created conflict between producers and larger traders as certain origins’ local market prices rise despite more recent C market drops. The market remains increasingly competitive as large players work to cover short positions, but our relationships are holding strong. We’re in the thick of Mexico season, final Peru shipments are almost here, first Rwanda and Kenya containers are here, and early Ethiopia shipments are on the water. As usual these days, the only constant is change, so stay flexible and read on to find out more. 

Logistics, Port, & Warehouse Updates 

The Russian invasion of Ukraine added new layers of complexity and volatility to global supply chains still reeling from pandemic disruptions, while another wave of Covid outbreaks in China threatens a cascade of new disruptions to the shipping industry. Port congestion and shipping delays remain an issue worldwide. Container shortages continue to cause delays and rolled and canceled bookings, especially in Brazil and East Africa. 

Congestion at West Coast ports has improved but remains seriously backlogged, while congestion at East and Gulf Coast ports has increased as shipping lines route cargo away from the West Coast. 

War in Ukraine and rising gas prices have caused spikes in bunker costs (charges added to steamships’ base ocean freight rates, protecting them from fuel cost increases). Those costs are passed on to shippers, increasing ocean freight rates across the board.

On land, domestic trucking capacity is still a bottleneck. Driver shortages continue causing delays transporting freight from ports to warehouses and hauling trailers from rail yards, while rising gas prices drive up trucking rates. Some freight lines have sold to larger companies to avoid folding, leading to fewer options. Less market competition allows for significant price hikes for LTL (less than truckload) freight.

Ongoing labor shortages across all sectors continue to hinder recovery from pandemic slowdowns. Trucking lines are particularly squeezed and are unable to invest time training new hires. Sheila at the Annex recommends that anyone relying on trucking companies for coffee delivery pay for the extra strap/wrap to protect the shipment from damage in transit. She also advises receiving freight with a camera ready—”take photos of pallets INSIDE the trailer before offload, and then again after the pallet is off the trailer. If there are any issues with the shipment, only sign documents to include acknowledgement of receipt with “requires further inspection” or “EXCEPTION/DAMAGE” noted on the paperwork.” She stresses that it’s not a good idea to refuse freight outright. “Freight lines respond better to a call asking for an inspection at the consignee location as part of a claim rather than a pallet sitting on their own dock.”

Supply, Demand, & The C Market 

Until the Russian invasion of Ukraine, the C market was headed towards $3/lb, hitting a high near $2.60/lb in early February with both supply and demand factors pushing the rise. The Brazilian real (currency) has strengthened against the USD since the beginning of the year, and while Red Fox doesn’t operate in Brazil, the origin is the largest supplier of coffee in the world and tips the scales whenever its factors affect price or supply. When the real strengthens, farmers’ motivation to export weakens. In Mexico, we felt this factor firsthand when the peso strengthened significantly during March, creating the same effect with Mexican domestic demand (among other supply factors) creating a highly competitive market for our sourcing team. Furthering demand woes and upward market pressure, the International Coffee Organization reduced its supply estimate to a deficit of over 3 million bags this season at the same time Minas Gerais in Brazil reported less than half its historical average production. All this comes after Colombia production and exports fell in February while US green inventories reported shrinkage in February.  

All those factors should underpin a bullish market, but on the day of the Ukraine invasion, the market dropped nearly 10c and continued to drop from around $2.50/lb to $2.10/lb over the course of two weeks. Institutional investors became bearish overnight, fearing a further stressed global logistics crisis and a derailed global economy. Analysts fear that consumer spending will shrink even though supply side economics suggest coffee prices should continue to strengthen. 

Our biggest uncertainty is not the coffee quality and consistency that Red Fox will source, but the unknown costs that will continue to add volatility and uncertainty. The price of oil will continue to put pressure on how we think about moving coffee. What will ocean freight and trucking costs look like over the course of the upcoming Mexico season? We can’t use historical costing data in answering this question and have had to become much more conservative as we look at forward booking, especially as almost all signs point to the cost of coffee increasing.

Mexico 

As you read this, our lab in the Oaxaca centro is at peak season and buzzing with activity. Harvest is nearly complete in our sourcing regions, we’re constantly cupping offers as more arrive, and deliveries are hitting the warehouse and dry mills. Our first shipment from Veracruz is almost afloat.

This harvest has brought particular challenges, some like those facing the rest of the coffee-producing world (rising cost of production, lower harvest, shipping and container issues/delays, inflation, etc.) and some unique to Mexico. 

Oaxaca is enduring a disruptive season of protest blockades in the city and surrounding areas, limiting mobility. A new tax law implemented this year and designed to reduce the informal economy and limit cash usage created new difficulties in how producers not yet registered in the tax system with a formal bank account receive payment, something not yet accessible to many smallholder farmers. In terms of productivity, Oaxaca’s harvest is looking to be about 50-60% of average production. As a region with heavy planting of Bourbon and Typica (which typically have a biannual cycle with a lower yield every other year), lower production was expected but not nearly to this degree, frustrating producers who finally see ultra-high C market prices coinciding directly with their harvest after so many years of a lower market. 

In Chiapas, much like Guatemala, labor shortages have severely affected picking, normally performed by migrant laborers who enter Chiapas through the Guatemala border on temporary work visas. The border is increasingly dangerous and effectively closed to legal crossing of people and goods. Without laborers to harvest it, cherry is drying on trees. 

Local cherry prices in Veracruz started the season near double last year’s price, setting off a country-wide scramble to acquire coffee by larger commercial buyers seeking to cover undelivered contracts from losses in Brazil and Colombia. Internal demand also continues to grow with national roasters looking to meet their needs and further pushing prices up. The competition for coffee is so extreme that it threatens to roll back years of quality recognition gains for the region as a whole, since most coffee is being purchased right in the field with no consideration for physical and cup quality. 

That said, we are genuinely seeing some of the best quality we’ve ever seen. We’ve opened up new supply chains in Chiapas with several new quality-focused producer organizations, and against long odds, we’ve also acquired the most volume we ever have in Chiapas. We expect to have several early shipments leaving in April and are working through shipping line headaches to get the fastest possible routing to the US. 

Ethiopia

In terms of our Ethiopia sourcing, we now have 5 FCL (full container loads) of Agaro G1 coffees from all of our usual partners (Nano Genji, Nano Challa, Kolla Bolcha, Duromina, Yukro, Gore Dako, etc.) afloat with ETAs into Port of New Jersey between 4/16-5/1 as well as 4 FCL of Agaro with ETAs into Port of Houston from 5/8-5/25. Our first Guji G1 containers from Gogogu Wate have current ETAs into New Jersey and Houston in late April, though we actually expect them to be May arrivals. We’ll also see the first of 3 FCL of G1 naturals from Guji Uraga hit the water this week. Updates on those to come. 

Generally, Ethiopian offerings continue to be volatile with rising prices in the face of a C market that’s dropped 30c/lb over the course of the two week period prior to writing. Even with Grade 2 prices climbing above $3.50/lb FOB (with certified organic G2 from $3.80) and Grade 1 prices now well above $4.00/lb, FOB demand appears relatively strong, especially for spot and afloat lots. The Ethiopian trade’s confidence in their differentials remains high as we hit peak shipment period.  

Exporters also continue to hoard parchment in hopes of the Ethiopian Government’s reversal of the Forex Retention Rule, which would let them retain a higher percentage of inbound dollars on green coffee exports.  

Dry mills are operating at full capacity even with limited overseas interest as larger roasters work to cover their positions short-term rather than taking positions in an expensive market (in some cases playing chicken with prices they don’t want to pay). In the trade at large, early season contracts are now somewhere between Addis and afloat en route to their destinations.   

Last quarter, we reported on how civil unrest pushed us into sourcing from just over the border. Now, a unilateral truce has been declared between the Ethiopian government and the TPLF as of March 25th. All hopes are that this leads to the end of the civil war.

Kenya 

Red Fox saw phenomenal quality out of Kenya this year. We’re finished contracting there for the year (Kenya’s main crop officially ended prior to Q2) and have 4 containers on the water, the first having just arrived into Port of NJ. We expect all of our Kenyan coffee stateside by May/June.

Outside of Red Fox, buying continues at an active pace into spring, especially on the top lot front. Larger buyers seem to be active in their own spot markets (eg. European roasters covering shorts from European spot markets) causing stocks in Kenya to remain strong and prices beginning to turn downwards. The fly crop has a strong outlook as long as rains arrive soon to activate cherry ripening.

Shipping woes continue to be a central theme with container availability very thin and shipping lines not offering much in terms of vessel bookings.  

Guatemala 

Guatemala harvest is in full swing and we’ve been cupping offers from both the San Jose Poaquil community in Chimaltenango and Finca Los Arroyos in Huehuetenango. Despite migrant labor shortages due to pandemic restrictions, quality is exceptional this year. Container shortages continue to be an issue. We expect first containers to go afloat in April with May arrivals to both NJ and TX. 

Peru 

We’ve concluded our current Peru shipment season with the last containers of the season arriving to US ports now.  

For next season, the coffee harvest has begun at lower altitudes, while the producers we purchase from are still a month away from the start of their harvest. While they wait for cherry to ripen, producers are preparing for the upcoming season: calibrating depulping machines, maintaining and upgrading wet milling and drying infrastructure, and participating in internal inspections conducted by producer groups to prepare for certification audits. Meanwhile, producer groups are meeting with banks and other lenders to line-up financing for the upcoming harvest and undergoing Fair Trade and organic certification audits. Many of the producer groups also held general assemblies in the month of March to review the prior year’s financial performance and accomplishments, receive their final payments and quality premiums, and elect new board members to replace those whose terms are up. 

Rwanda 

Our final Kanzu lots have arrived on the East Coast and we expect warehouse availability in the next couple weeks. Lots are also now available in the Annex for West Coast customers.

As for next season, this year’s harvest began in late January with peak cherry picking occurring in mid-to-late March. Cherry prices are high following the increased C market; competition is already intense. We expect to start seeing offer samples in late May/early June. 

Earlier this month, the Rwandan government fully reopened the country’s land borders two years after closing them in an effort to curb the spread of COVID-19. We’ll have to see how this impacts export logistics for the upcoming shipping season. Bookings for ocean freight routes from East African ports continue to be challenging. 

Colombia 

Expectations for an extended rainy season through the La Niña year persist, and with them expectation for reduced production for both 2022 harvests. Sufficient ripening come June/July requires extended periods of sunlight and warmth through spring.  

Differentials continue to rise as larger trade actors continue to cover their short positions through a lack of available coffee on the production side.  

Ports continue to see limited container availability and service from shipping lines. Buenaventura remains the most congested of the three ports while Cartagena faces the largest struggles finding efficient routes to Oakland and Charleston. Santa Marta shows increased container availability, but doesn’t have the infrastructure to handle a high volume of shipments.  

Primary Southern producing regions like Nariño, Cauca, Huila, and Tolima begin harvest in late April. We’ll have a much better sense of what to expect from the 1st Semester harvest from supply chain partners in Inzá and Tablon de Gomez as we get closer to summer.  

From Geovanny Liscano in Inzá: “The December 2021-January 2022 harvest was inconvenient due to heavy winter conditions/heavy rainfall. A lack of flowering creates concern for the harvest beginning May 2022. Prices remain high across Inzá for any parchment available.”

From Gildardo Chincunque in Tablon de Gomez: “The initial outlook for the coming season is weak due to heavy rainfall. We look forward to working together come July/August regardless.”

To learn more about our work, check out our journal and follow us on Instagram @redfoxcoffeemerchants, Twitter @redfoxcoffeeSpotify, and YouTube.

C Market Volatility, Complex Logistics & Ethiopia Civil Unrest Spill Over Into Q1 2022

Red Fox Coffee Merchants Origin & Shipment Update: Q1 2022

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As we sail into Q1 of a new year, a lot of the issues we dealt with through the third and fourth quarters of 2021 persist. Logistics are as tangled as ever on a global level and still require extensive planning and constant management, with ever-rising costs at every level of the supply chain. The C market price is ever more volatile and elevated, with new heights reached in the month of December. Civil unrest in Ethiopia has placed us in the region—but not in-country as we would usually be this week—cupping early offers and making commitments and firm plans, and we’re excited for the upcoming season. Despite logistical challenges, Peru’s shipping season saw early containers landing at the onset of Q4 and is now wrapping up. We’re on the ground in Mexico connecting with producers as the season peaks, and in Kenya tasting and approving offerings with first shipment already on the water. Despite the surrounding chaos, we’re managing details, landing coffees within our expected windows, and staying constantly connected with supply chain partners at all levels. More detail on all of this, in general and origin by origin, below. 

Logistics, Port, & Warehouse Updates 

The state of global shipping continues to be extremely challenging as we round the corner into 2022. Securing space on vessels is a daunting task. Even once bookings are secured, departures are repeatedly rolled, delayed, or outright canceled. Rates for all routes continue to increase and shipping lines are adding fees for port congestion on top of the already inflated rates. 

On the import side, trucking capacity is becoming a major issue. Shipments arriving to US ports are frequently sitting at port incurring demurrage fees (fees charged by shipping lines to importers when a full container is not moved out of the port/terminal within the allowed free days offered by the shipping line) and extra days of chassis (a special trailer that allows ocean containers to be moved via truck, required for shipments transitioning from sea to road) because of difficulty securing trucks to unload and move cargo to the warehouses. Costs continue to increase across the board. All services—trucking, rail, warehouses—continue to experience employee shortages (and the knowledge deficits that come with them), increased costs, Covid issues, and delays. Rail services are seeing particularly long delays. 

The port of Oakland, though still experiencing delays and not operating at full capacity, has seen modest improvements in recent weeks. However, we do expect congestion in West Coast ports to persist well into 2022.

Warehouses are reporting a lot of LTL freight shipments to customers still being sorted out from the holidays. Freight carrier holiday closures and winter weather in some states has affected many freight deliveries—some shipments are still stranded at intermediate terminals while carriers sort through the backlog. Freight is moving, but slowly. 

Supply, Demand, & The C Market 

We continued to see a meteoric rise in the ever-volatile C market this past quarter, which spiked past 250 in early December. The days of 2-3 cent moves being considered “volatile” are behind us when 5 or more cent rises have become commonplace (we’ve seen an average daily change of 5.6 cents over the period between 9/21-12/20). Expectations of lower global supplies due to unfavorable weather and supply chain disruptions continue to prop up the price of arabica futures even though the market has settled closer back to around 230 at the time of writing. It’s been quite astonishing to watch the C market price rise to levels higher than what our baseline price for some qualities has been in prior years in Peru (as covered in the last quarterly update, we’ve of course adjusted our purchasing prices this season in Peru—producers deserve the benefit of elevated base prices in low C market years as well as in high C years). Reports anticipate the events of drought and frost in Brazil may curb growth potential for the country’s coffee crop for the next two years. USDA production estimates Brazil coffee exports to drop by over 15 million bags recently, also citing La Nina’s heavy rains in reducing Colombia export estimates. Supply chain disruptions continue to wreak havoc on transit times and port congestion continues. Bloomberg reports shipments out of Brazil are taking as long as 100 days where the old normal was 30. We’re fortunate to have exceeded our expectations on transit time out of Peru so far without much additional transit time from prior harvests.  

What does this mean for you? It certainly feels like the days of sub $2/lb C market are behind us for the foreseeable future and some analysts feel bullish that we could see the market rise closer to $3/lb. We’re thinking about this daily as we begin to enter Mexico acquisition season to ensure we continue to pay the highest prices and quality premiums to our partners. We are well positioned with the communities/producer groups we work with due to strong relationships developed over the years from our base in Oaxaca that we continue to grow year over year.

Mexico 

As Mexico enters peak harvest season, a number of challenges face producers and traders alike. Our team at origin has already been busy for a few months making pre-harvest visits to producing communities across the country and getting a sense of how the harvest will shake out this year. 

Harvest at lower and mid elevations began in mid December and peak harvest of higher altitude coffees will be mid to late January and into February. Late rains have delayed the start of harvest in some regions. In areas of heavy Bourbon and Typica production (like Oaxaca) the bi-annual cyclical nature of these varieties is in a down year, which should bode well for quality but less well for total yield from these already lower-yield varieties. Strong rains and gains in farm renovations in the offseason and past few years appear to have boosted the predicted crops from Veracruz and Chiapas. 

A high C price in the outset of the harvest has created very high local prices for lower elevation coffee in Veracruz and Chiapas and led to strip and underripe picking to get coffees into the mills and sold quickly. Milling and exports of top quality coffee are expected to begin the second half of March/first half of April with first arrivals to the US in late May/early June. As always, we’ll keep you informed of any changes on that front. Port congestion and container availability are expected to be challenges again this year, but we are developing strategies early to thwart significant delays. On the positive side, costs for ocean freight out of Mexico don’t seem to be increasing much over last year. 

Economically, inflation is hitting Mexico very hard and is at its highest level in 20+ years, with gas and other basic goods (mainly food) prices increasing exponentially. Coupled with a rise in the national minimum wage scheduled to go in effect in January, costs of production are necessarily much higher all around compared with the 2021 harvest. Coupled with the rising C market, prices for quality and specialty coffee will be significantly higher this season and we expect to continue to pay substantially higher prices than other buyers for the qualities we’ve been working closely with producers to develop. Pepe Arguello of Finca Santa Cruz and manager of Cafeco is reporting increases of at least around 40%-50% over last year for both labor and parchment prices in Chiapas, where much of the labor for picking cherry has historically come from Guatemalan temporary migrant workers, but the compounding border issues (including refugees coming from Haiti and Honduras, among other countries, being stuck at the Guatemala/Mexico border in Chiapas due to disastrous US policy), and lack of visa permits are preventing many from coming for work.  

On the Covid side, Mexico is experiencing another surge in confirmed cases after a downturn last fall when the vaccine became widely available to adults and young adults across the country (children under 15 have not yet received vaccines, despite increases in pediatric hospitalizations). Only just over half of the population have received their vaccines, although they are widely accepted among adults and haven’t been politicized as in the US (for example, 95% of adults in Mexico City have received their first round of vaccines). The booster campaign just launched for senior citizens, teachers, medical workers, and other essential workers. The government has so far resisted any restrictions on foreign travelers or internal mandates.  

Ethiopia

We are wading into the great unknown this season in Ethiopia. The political situation, and contradictory reporting within the country, keeps us just over the border at the moment. While we would typically be on the ground in Addis by the beginning of January we are currently outside of the country, though in the region, working to execute our first half shipments from Agaro and Guji. As you read this we have our spoons in 15+ containers’ worth of offerings from Nano Challa, Nano Genji, Kolla Bolcha, Duromina and more from the Kata Muduga Union. We also expect to see our first G2 offerings and the first Uraga arrivals to Addis before we leave.  

Fortunately, our Ethiopian supply chain is older than Red Fox itself at this point. We have confidence in our small handful of trusted partners who are still working from the capital. While the global shipping crisis may keep us from our standard Feb/March arrivals in North America, we don’t expect delays past April at this point. More to come on that over the next few months.  

Price-wise, the state of the C market has pushed cherry prices upwards of twice their 2018/19 levels and 30-40% higher than last year. We are being quoted roughly 40-50c/lb FOB from last season’s levels. Top Ethiopia will be pricey in 2022.

From our trade partner in London, Scarlett Fishburn:

“In terms of updates, cherry prices continue to rise (now looking at 53/55 etb/kg) due to the higher NY and farmers’ speculation on the extent of the damage of extreme weather in Brazil last year. With little cash/tight liquidity, this is preventing big players coming to the market aggressively and so only really small guys are buying at these levels (which probably elevates the price outlook more than if the big players were factored in).

The National Bank announced last week that they are using their reserves to loan 12 billion birr to players in the coffee industry in an attempt to increase the amount of finance available during the harvest period.

Security seems to have improved since we last spoke. You will have seen that the US removed Ethiopia (and Mali and Guinea) from the AGOA program.”

In addition to Scarlett’s note, we are hearing that cherry in coveted producing areas of the south, specifically Uraga, are now upwards of 56 birr/kg as we head down the home stretch of the harvest. While the harvest is delayed in the south this season we do expect the first G1 stocklots to hit Addis by end January.  

Kenya 

As we wade into some unknowns with the Ethiopia season, things are off to a quicker start than ever in Kenya. Our first containers have left Mombasa and are now en route to New Jersey. We’ll be cupping through swaths of samples on the ground in Nairobi over the course of January to add reinforcements to our offerings.  

From our partner Kennedy Keya in Nairobi:

“Main crop cherry picking started earlier than usual. This was due to the early flowering that started in January 2021. Cherry picking usually starts at the end of October in areas near Nairobi (Kiambu and Thika)—but this season cherry picking for the main crop started at end of September and continued into December. Grade retention is fantastic and quality is great. We are seeing more bold beans with AA and AB grade making up 80 to 85% of outturns. We attribute this to proper use of farm inputs by farmers leading to well-fed trees and good weather conditions throughout from flowering to final fruit maturation.  

Prices have remained high and the high NY market is resulting in high historical prices for farmers.

Logistics remain slow. Shipping lines are constrained. Connecting vessels are full so bookings for nearby shipments are declined in most cases. Another struggle is getting empty containers. It takes a lot of advance planning to reduce the struggle to get empty containers.”

Guatemala 

The Guatemala harvest is underway in the lower elevations with picking of higher grown coffees just beginning. Overall, ANACAFE reported an expected 3% higher yield over last harvest, with regions such as Huehuetenango seeing slightly more gains than that. 

An anchor in Red Fox’s Guatemala sourcing for the past three years, Felipe Martinez of Finca Los Arroyos in La Libertad, Huehuetenango confirms early December pickings and expects to continue in earnest as the new year gets underway.

A trusted supply chain partner told us that despite the ongoing pandemic, he is expecting fewer disruptions this harvest and is already seeing an increase in their overall ability to collect and receive coffee, mainly through growth in projects in more remote areas such as Santa Barbara, Huehuetenango. We anticipate continued success in these investments, bringing in more volume from these small holders. 

Look for more updates as we get into the harvest. Currently we anticipate the usual May shipments for peak harvest Guatemalan coffees. 

Peru

The Peru shipping season is wrapping up with 17 containers currently en route to the US and the final handful of containers being milled to ship later this month. We will have warehouses in NJ, CA, and TX flush with fresh coffees soon and through spring.  

Peruvian ports, specifically Callao and Lima, have been some of the most affected during this global shipping crisis with general lack of container availability paired with shipments rolled on a weekly or monthly basis.  

Despite challenges with parchment competition in the early months of the harvest, container availability and the shipping crisis, we managed to increase our purchase volume almost 30% from 2019 and 2020. Our relationships across the country, though most specifically Cusco and Amazonas, continue to grow and be the backbone of Red Fox Sourcing Company Peru.   

Colombia 

Colombia has been the heart of the coffee sourcing struggle since entering the first semester harvest late spring 2021. Early pandemic lockdowns, violent political protests, prolonged port closures, the volatile C market, and intensive rains brought on by La Niña all equaled a massively decreased specialty coffee production. We brought in four containers from the peak summer season at FOB price levels near 50% above 2020 levels. As local prices continued to increase into the second semester harvest, producers across the country rushed to strip pick green fruit in order to deliver unselected parchment at exorbitant prices. Predictions for the coming summer crop also call for more intense rains as the ‘22 La Niña season peaks in the next 6-8 weeks. Availability for top quality Colombia may suffer until Q3 2022, but we’ll have a better assessment in our Q2 report come April.  

From our dry mill and export partner Frederic Boppe in Popayan:

“Production has decreased from last year, mostly due to excessive rains during the last semester. This affected flowering and maturation of the cherries, thus affecting quality and yields in certain areas. Drastic increase in price of fertilizers has also caused a serious impact in production, as producers tend to apply less. The harvest period was shorter than usual and production is over. Parchment is tight, with very few offerings from this area at this time.

This has been a very unusual year. Due to the drastic price increase of over 100%, several producers defaulted in their previous commitments on their deliveries to cooperatives and exporters. The spot market has ruled the trade, and most of the coffee which came out in the last semester was immediately purchased by companies who were short, driving the internal market even higher. All parchment was purchased for immediate delivery and paid to producers upon delivery at the mill. Future commitments are no longer being accepted and cash advances have become very unusual. Today, there is still very high demand with base prices around 2,250,000/carga for standard coffee, but exporters must pay a premium of at least 100,000/carga to secure decent quality. In the internal market, no transactions for future deliveries are taking place and all coffee is sold at the spot market. Longer-term offerings from exporters are very limited. The recent ICE market levels (reaching 2.50/lb) and record US/COL peso level transactions (breaching the 4,000 level), have undoubtedly generated a higher income for coffee producers, strengthening the coffee producing sector.

Logistics: Currently we expect that everything will be back to normal by Q3 2022. Shipping lines are calling off vessels and the lack of containers is dramatic. In general we expect an average delay of 45 days for upcoming contracts. The flow is normal for almost all destinations. In November, the US was the main destination for Colombian green coffee exports with a participation of 42%. Finally, we estimate freight costs have increased by 60% over the last year to the US.

Rwanda 

We’re eagerly awaiting the arrival of our Kanzu lots from Rwanda. Ocean freight routes from East Africa continue to be beset by delays in transhipment ports and lack of space on vessels, resulting in very long transit times. We currently expect US East Coast warehouse availability for Kanzu in the second half of February. 

Looking ahead to the upcoming harvest, the crop is developing well and weather conditions have been favorable. Cherry picking in lower altitudes is expected to begin in late January/early February with higher elevations ripening later in the season. Last season’s good prices are motivating farmers and the outlook for quality and volumes is good. 

Export logistics are expected to be challenging again this year. Landlocked Rwanda relies on its neighbors—Uganda and Kenya—for the transport of all imports and exports to and from ports. Covid testing requirements at border crossings have contributed to long trucking delays, sometimes as long as three weeks between Kigali and Mombasa. Low volumes of imports into the country have also made empty containers scarce. 

Ecuador 

After a few unexpected challenges, we have chosen to air freight all of our Ecuador coffee this year and it should be arriving in the states very soon. We’re expecting great lots from our long-term partners Hernán Zúñiga and Andrés Dávalos, Mateo Patino, and Gilda Carrascal from 1600 Estate. We’ll also have some stunners from newer producer partners Galo Davilos and Yesenia Murillo.  

On the Covid front, like much of the world, Covid cases are on the rise due to new variants. Fortunately, Ecuador has a high vaccination rate with over 77% of the population vaccinated. However, due to the rising case numbers, the government just put out a mandate that all eligible residents over the age of 5 get vaccinated.  

Get in Touch

As always, if you have any questions, concerns, or thoughts, let us know. We’re here to help.

Newsletter: Kenya Gakuyu-ini Offer

I remember speaking with my old pal Ryan Brown a few years back about what makes Kenyan coffees so special. Is it producer acumen? Is it terroir? Or varietal? Or processing? As is always the case, many things contribute to the tasteable outcome, but in the instance of Kenya, process itself has a tremendous impact on profile. These are the cleanest coffees in the world in the most literal sense. Red Fox has its own buying mantra, built around the idea of repeatability in coffee production. Not the repeability of a specific profile, per se, but of a certain level of quality year after year. If our buying philosophy centers around cleanliness and sweetness, then we’re giving producers the chance to deliver to us every year if they can meet those standards. In this sense, picking ripe fruit and maintaining a clean processing environment are of foremost importance for us.

Nowhere are coffees as thoroughly cleaned as they are in Kenya. The typical process looks something like this: after depulping, coffee beans are left to ferment. Then, after 24 hours they are washed and left to ferment again, without water, for another 12-24 hours. The parchment is then washed before being soaked in tanks for another period of roughly 12-18 hours. At this stage, the beans are moved to skin drying beds where they are laid out in thin layers to allow the mass of water weight to fall. This happens over the course of a morning. This entire process is sometime referred to as the 72 hour process. From there the coffee goes to raised drying beds for the next 8 to 12 days. By the end of this process, the coffee is as clean as a whistle. The work is already done. Not a drop of mucilage will be found on the pristinely white parchment, and no extra flavor is imparted to the beans except by what happened at the farm and in the fermentation tanks.

Due to this impeccable standard of processing, flavor profiles of Kenyan coffees are as perceptible as anything we know. Gakuyu-ini is a shining example of that concept this season. Most years we’ll buy an AA from one outturn, an AB from another, and we’ll usually look for a few PB lots as well. Only in the rarest of instances is an outturn so beautiful that we buy it top to bottom, or AA to AB through PB, meaning we buy each separated part of an entire lot.

I spent several days on cupping tables across Nairobi this past February. Coffees were nice the first day or so, but I hadn’t come across something that knocked my socks off. Not until day three, that is, when I tasted Gakuyu-ini. The floral character of the fragrance stopped me in my tracks. That heady, fleeting, ultra-sweet, fresh-cut lilac aroma was irresitible; the crisp green apple, sweet lime juice, and ripe pineapple character in the cup too perfect to deny. It was the most refreshing coffee I’d tasted all year, which is saying something, considering I spent all of January in Ethiopia selecting lots.

All of our Kenyan coffees from this season have cleared into warehouses on both coasts, and our selection is the best it has been since we opened the doors at Red Fox three years ago. We’ll make them available over the course of the spring — a few of the best lots were listed last week, more of those classic, ripe, dark fruit bombs that are not to be missed — but I wanted to kick off the newsletter campaign with my personal favorite of the season.

Kenyan coffee is many different things. To say that Gakuyu-ini is the quintessential Kenya profile would not necessarily make sense. I love blackcurrant and blackberry, too, but those are descriptors more charateristic of Nyeri. What I will say is that this Gakuyu-ini outturn is Kirinyaga at its finest, where the floral character reminiscent of Ethiopia meets the heavy, juicy fruit tones of its neighboring producing zones in the Central Highlands.

The Gakuyu-ini Factory is a member of the Thirikwa Cooperative Society. Altitude reaches 1700 masl. SL28 and SL34 are the primary varietals, although Ruiru 11 can also be found in the area. This outturn was harvested in December.

We are offering two lots today that are essentially the same thing, i.e. coffee from the same cooperative that was harvested, processed, and bulked together over the same period of time. The only difference between them is bean size, and yet they couldn’t be more different from each other. Aromatically speaking, the AB exudes the fresh cut flower character of lilac alongside golden honeycomb notes, while the AA has heavy sweetness ranging from clove and allspice to dried cherry and raw pipe tobacco.

In the cup, the AB is lighter and more ethereal, with the brilliance of lemon-lime soda and passion fruit. The AA is clearly AA — blackcurrant and blueberry are clear as day. Melted butter and something tropical like kiwi surface in the AB’s finish, while the AA stays strong and very sweet through the finish with a distinct apple cider quality.

Both coffees are from the same outturn, but you’d never guess by tasting them. They’re 90 point coffees by industry standard, but they’re more than just that. We suggest procuring a bit of both and offering them side-by-side for conversation’s sake alone.

Cheers,

Aleco

Newsletter: Kenya Gachatha Factory

Living in the Bay we’re fortunate to be around some of the American wine industry’s finest participants, from importers, to bars and shops, to natural winemakers in Sonoma county and beyond. It’s a beautiful place to be and we often find ourselves sharing anecdotes with our pals on that side of the fence. One of my favorite terms used by wine folk is “unicorn wine.” A unicorn wine is a wine that everyone talks about, a wine that everyone wants to drink, but a wine that is very rarely found on shelves or even tucked away in the deepest cellar in Berkeley.

It’s a dreamy concept that instantly makes me think of the tales of grandeur I’ve been hearing for years from some of the elder coffee statesmen that I respect most; romantic rants about the lucid blackcurrant and blackberry flavor of the most exquisite Kenyan coffees; conversations that habitually end with the lament that Kenya just isn’t quite what it used to be, that maybe, although forever and always a complex player, Kenya doesn’t quite offer the power and the purity that it once did.

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I would classify today’s Kenya offering as a unicorn coffee. To put it simply, this AA lot from Gachatha offers unadulterated flavor. It’s pure. Its sweetness is perfect. The aromatics are fragrant, fresh peach blossoms. Cup character? Take those sweet floral aromatics and turn them into ripe peach and creme fraiche with a drizzle of wildflower honey on top. The acidity? Dramatic. Think fresh redcurrant, golden raspberry, and the whole dang basket of ripe stone fruits from cherry to apricot. This is the best Kenyan coffee I remember purchasing in years. Maybe ever. We scored the arrival 92. The AB is every bit as sweet and wild, just slightly more contained. A stunner of a coffee nonetheless — we scored it 90 on arrival. If this Gachatha outturn doesn’t rival those mythical lots from the 70’s, 80’s and 90’s, then I say they truly no longer exist. Maybe they never did.

The farmer members of Gachatha received nearly 85 Kenyan Schillings per kilo of cherry for this outturn, one of the single highest prices paid for a lot in the entire country this season. This is the second consecutive year that Red Fox and C. Dorman have paid to keep these folks at the head of the class.

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Newsletter: Kenya Nyeri Offerings 2014

If anything is certain in the coffee industry in Kenya, it’s that politics will always have a presence. This past 2013/2014 season was no exception. The industry saw a heavy dose of interference from outside players, politicians with no prior experience in the coffee trade, and it has taken a serious toll on farmers across Kenya’s most fabled coffee growing region. Sadly, the propaganda driven by the county office of Nyeri has resulted in unfulfilled promises and greater hardship for farmers in the region. Not only were the record prices promised by the Nyeri government not delivered, but half the crop failed to be delivered the the market at all. It’s one of the biggest tragedies I’ve witnessed in my short coffee career to date.

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Nyeri is one of the coffee industry’s most prized growing areas. Most of the production is centered between Mt. Kenya and the Aberdare mountain range. The town of Karatina sits at its epicenter. With the perfect mix of high altitude, quality varietals, and climate, it’s a garden of eden for top coffee lots. Very few other coffees, if any, receive the justified acclaim and accompanying price differentials that the best Nyeri lots receive.

This year, Red Fox has continued to work with our one and only supplier of Kenyan coffees and our patience has paid off. We have top lots now afloat from Nyeri; lots that fortunately made it out of the governor’s grasp and on to the CKCM mill in the Central Highlands. By all appearances, and based on the latest news coming from Kenya, I’m confident enough to surmise that things will be back to working order come next season. At the very least we hope that this latest political interference in Nyeri will no longer affect our ability to purchase top Kenyan coffees, nor our ability to ensure that farmers in Nyeri are paid for the exquisite coffees they produce.

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Kenya has some of the most unique and powerful cup profiles in all of the coffee producing world. Flavors tend to run the full sensorial gamut — from dark fruits to refreshing citrus, from raw honey to dark muscovado sugar, and from a syrupy mouthfeel to a mouthfeel full of fresh cream. We’re offering three lots from a range of altitudes in the Abderdare range this season. We put these samples, and dozens more, through heavy scrutiny on our cupping table. They are the best lots Red Fox saw this season and are in very limited supply.

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