Posted on 11/25/2007 11:15:53 AM PST by JACKRUSSELL
Everyone in the small, riverside village of Da Kai He appears to be busy with building a new house, new drying floor or expanding their pulping area. The investments are mostly thanks to good coffee prices in recent years.
For while the village in south-western China is surrounded by hills covered in tea bushes and strong-smelling rubber plantations, the families here rely solely on coffee for their income.
They are among hundreds of Chinese smallholders to have joined the world’s coffee growers in the last ten years. And each year their crops are being bought up by more of the leading coffee brands.
“It’s a question of the quality of Chinese coffee,” says Li Hong Fang, a coffee trader at Sinocafe, based in Simao, China’s up and coming coffee capital. His clients last year included leading names in Germany, Belgium, Switzerland, and Japan.
“It’s very similar to Colombian coffee or even better. The handpicking and processing are well done. And high quality and limited production results in very good demand.”
The story of Chinese coffee is much shorter than its several thousand-year-old tea history. Attempts to grow coffee commercially started in the 1960s when the communist country needed something to trade with the Soviet Union in exchange for weapons and other goods.
But it didn’t take long before bad management by large, state-owned companies saw production from 4,000 hectares of coffee trees dwindle to a mere few hundred tonnes of berries.
It was the arrival of Nestle, and its new Nescafe factory in the southern city of Dongguan in 1988 that got things moving again. During the 90s, the company distributed seeds, fertiliser and loans to farmers to convince them to increase the local supply of beans. They were also offered free training and consultancy on all aspects of the crop.
Record prices in 1997 gave an additional boost to China’s expanding coffee growing area. The new crop faced a setback after severe frost in 1999 but with Arabica prices once again at almost record highs, production is rising sharply, especially among smaller farmers.
“We keep seeing new villages growing coffee,” says Wouter de Smet, head of Nestle’s agriculture service. “This year we were invited to two new villages to give them training. We didn’t even know they had coffee there.”
The lanky Belgian towers over most of his suppliers but there is clear appreciation of the work being done in the area by Mr de Smet and his team.
Yunnan province, the only region where coffee is grown, produced 23,000 tonnes of Arabica last year, up from less than 2,000 tonnes in 1997. It is forecast to increase production to 30,000 tonnes by 2010, not so far off Kenya’s output of 45,000 tonnes last year. But China will not target the same markets as Kenya.
Nestle has advised farmers to remove the Bourbon and Typica varieties and replace them with Catimor, an Arabica hybrid. It is better suited to the lower altitude environment in Yunnan, which is right on the Tropic of Cancer, the border for good coffee-growing. It is also resistant to rust disease and does not have on/off seasons.
In trials at Nestle’s experimental farm, another Kenyan variety has not produced sufficient yields either. The firm has instead selected two new hybrid varieties for breeding in China that will produce higher yields, even though the cup quality is not quite so good as a pure Arabica.
Chinese coffee is nevertheless increasingly popular both domestically and in Asia and Europe. Chains like Starbucks are expanding in China and are looking to source their coffee locally.
Meanwhile big trading companies like Switzerland’s Ecom are buying more and more Chinese coffee for European customers, despite the extremely expensive freight. Nestle itself buys about 4,000 to 5,000 tonnes each year, with 2,800 tonnes going to its factory in China and the rest to Nestle Japan.
“We almost did too much of a good job,” admits Mr de Smet, who previously worked with coffee growers in Tanzania. “Now the quality is really good so there are more and more traders coming here. Competition is fierce.”
Coffee growers are also becoming more savvy about how to make money from their crop. Nestle does not draw up contracts with the farmers, instead issuing twice-weekly price announcements and inviting growers to sell their green beans at its buying station.
It accepts any quantities, ranging from 20kg (last season’s lowest) to several tonnes from bigger companies. Smallholders are paid by cheque on the same day.
“The aim of direct procurement is to cut out the middle man,” says Mr de Smet. It also means that the world’s leading coffee bean buyer can keep a close eye on quality. Samples are taken from each delivery, no matter how small, and blind-tested in the company’s lab by a team of trained coffee tasters. In the busy season, they will taste up to 50 cups a day.
But the Nestle price also drives speculation across the sector. Comparable to the world market price for Honduras coffee, Nestle’s China price is used as a reference by farmers, traders and international buyers, all hedging their bets about how much it will move in the following weeks.
“It can sometimes turn into a market out here. It seems that when one person in the village decides to sell, then everyone follows so we can end up with an entire village at our buying station on the same day.
“It takes good management to keep the smallholders in an orderly queue,” says Mr de Smet.
Nestle says around 600 growers or companies now sell to the firm through its buying station. The fledgling coffee sector is also generating incomes for those supplying the growers with key services.
Zhang Jian Xun, formerly an engineer in a government-run tea machine factory, has set up a workshop where he makes small-scale replicas of leading brand pulping and hulling machines to suit small farmers’ budgets. This helps farmers keep the profits contained in green beans rather than forcing them to sell the ripe cherries on to a larger company.
Other entrepreneurs have opened hulling factories near to Nestle’s buying station. Local women are employed in sorting the beans into different grades after the hulling. In all, Nestle claims around 14,000-16,000 people are directly impacted by its operations.
Not everyone is happy about Nestle’s presence though. Traders frequently complain that the group sets its prices too high. One such trader went as far as making his complaints heard at Nestle’s Switzerland headquarters. But they are certainly getting experience in market economy, admits the Sinocafe trader, Mr Li.
And whatever can be said about Nestle’s pricing, its influence on stimulating production cannot be denied. The firm is currently running a trial to investigate ways of reaching a higher yield per terrace, one of the unique aspects of coffee production in China with trees planted on steep hillside terraces.
Growing output will depend on how global supply and demand shapes prices, as well as domestic trends influencing labour and land costs. The government is also under increasing pressure to guarantee domestic food security. China has to feed 22 per cent of the world population on only seven per cent of the total arable land.
There are concerns about the environment too. “In China, we’re talking more and more about the environment. It’s impossible to clear forest for more land now,” explains Mr Li.
Much of the appeal of selling Chinese coffee is ironically the novelty element, says a buyer at one of the leading Swiss trading houses.
“Chinese coffee is getting a name in the world. There are more and more international consultants coming to Yunnan to see for themselves the quality here,” says Mr de Smet.
For years people have been planning on how to sink Africa, but can we sink China instead?
Chinese coffee beans will end up in your can of Folger’s but not in your cup at Starbucks.
10 cents a pound? Puhleeze...
Tell Africa not to worry-it won’t be long until methyl ethyl ketone, lacquer thinner, lead or some other such treat shows up in Chinese coffee
Your decaf prolly already uses methylene chloride to remove the caffeine.
One of the first post-war Vietnamese commodities to become globally successful was its native coffee crop. Not sure of the whole story but getting that huge source online caused a drop in global prices. VN is still the number 2 or 3 coffee producer in the world, and VN beans are in all the major blends.
As for Chinese coffee that was originally produced to buy Soviet arms, I want nothing to do with it or with any other consumable Chinese product.
Another “surprise issue” for our bumbling Congress to deal with in 2008: proper country labeling for all imported food goods.
Interesting, thanks!
Houston is the top import of Chinese coffee.
Absolutely; yet we have heard NOTHING mentioned about this issue on anyones campaign.
Currently, there is no requirement for any "American" company to list what ingredients in thier product came from where.
Our processed food supply is no longer secure, you'd be hard pressed to find ANY product on the store shelf that doesn't contain something made in China, with the exception of locally grown fresh fruit and vegetables, fresh meats.
So, if you want to ensure that you aren't eating anything imported from china, stick to the fresh stuff, and even then be very careful, ask where it came from if it's not labeled.
Why would you think that? They are already more than willing to pay $5 for a cup of something that tastes like the water used to put out a pile of burned stinky socks.
Chinese coffee would be an improvement in taste, and at 10 cents a pound, Starbucks would rake in even more profits. It wouldn't surprise me if they raised the price for this "rare" Chinese coffee. (in a made in china paper cup w/ a made in china stir stick w/added chemical whitener.
I am stunned anyone would start a business in China. Other then costing jobs to the civilized world, the Chinese government can swoop on and claim private property for “the people.” Just like what happened in Cuba. In fact Socialist countries have a pretty consistant track record of doing this.
When this happens, and we all know it will, will those companies be begging their respective governments for a bailout after losing trillions of total dollars? In otherwords, will the taxpayers have to pay for this outsourcing? Remember the Mexican bailout.
decaf coffee-about as useful as non alcholic beer. Why bother drinking either?
Refuse anything consumable from China! Working hard to delete “anything made in China” from our buy list, but its very difficult to do.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
