Your Morning Coffee May Be Chinese After Volcafe Export Deal

Get ready for Chinese coffee.

Volcafe Ltd., the coffee unit of trader ED&F Man Holdings Ltd., formed a joint venture with Simao Arabicasm Coffee Co. to promote arabica beans from Yunnan, China’s biggest coffee-growing region, according to an e-mailed statement today. Yunnan Volcafe Ltd. will source and process beans for export to global clients.

Coffee output in Yunnan, which accounts for 95 percent of China’s total production, regularly exceeds one million bags, almost equivalent to Costa Rica’s output, according to Volcafe. That’s about ten times the 104,000 bags China produced in 1998, the International Coffee Organization estimated in a 2013 report. China is not a member of the ICO. A bag weighs 60 kilograms.

Volcafe, the Winterthur, Switzerland-based trader, has been a major buyer of coffee from the region over the past ten years, it said.

“Chinese mild arabica is still relatively new to the world coffee scene, but its improving consistency means it is rapidly growing in acceptance with global roasters,” Jan Kees van der Wild, global head of commodities at ED&F Man said in the company’s statement.

Arabica coffee climbed about 74 percent this year after a drought in Brazil, the world’s largest producer, hurt production. Futures settled at $1.9235 a pound today on ICE Futures U.S. in New York.

Volcafe estimates worldwide arabica production will be 75.3 million bags in the 2014-15 season that started this month in most countries, down from 86.1 million bags in the prior year.

French Missionary

The arabica bean are favored by Starbucks Corp.

Plantations were introduced in Yunnan by a French missionary in the late 19th century. Coffee farming, however, was largely ineffective until the end of the 1980s when the Chinese government and the United Nations Development Program started a joint program to boost production, according to the ICO.

The sector benefits from “good organization and efficient management” with the government and big multinational companies continuing to invest in raising output, the ICO said. Coffee consumption in China rose to about 1.1 million bags in 2012 from 199,000 bags in 1998, and if average annual growth of 12.8% is maintained it could reach 2.8 million bags by 2020, the ICO said.

“New origins take decades to establish,” Mark Furniss, Volcafe’s director of business development for Asia, said in the statement. “Our commitment is a recognition of China’s concerted efforts to develop its coffee industry from local producer to global supplier.”

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