What Is Driving Yunnan Coffee Prices Up?

Yunnan coffee bean prices have risen sharply since 2021, when domestic tea beverage and coffee brands began putting Yunnan beans on their menus. A second-generation coffee farmer told Yicai that spot prices for Yunnan beans climbed about 65 percent this year, with first-grade commercial beans reaching 34 yuan per kilogram after the 2022 Spring Festival.

Pandemic-related supply chain delays stretched delivery times from one or two months to three or four, so supply fell while demand rose. The region still faces uneven cultivation levels, thin talent and supply chain support, and limited pricing power, though Pu'er and Ning'er County are pushing toward specialty-grade, standardized production.

Yunnan's coffee industry is undergoing a notable round of price increases and market attention. Since 2021, domestic new-style tea beverage and coffee brands have successively added Yunnan beans to their menus, and the national trend of guochao consumption together with domestic coffee enthusiasm has driven up the popularity of the producing region, causing consumer demand for Yunnan coffee to surge and directly driving up coffee bean prices. At the same time, the global pandemic caused supply chain delays, extending delivery cycles from one or two months to three or four months; supply decreased while consumption rose rapidly, further pushing up the market. As Yunnan coffee welcomes opportunities, it also faces practical limitations such as uneven cultivation levels, insufficient talent and industrial chain support, and a lack of pricing power. Places such as Pu'er City are promoting industrial upgrading with the goals of specialty-grade and standardization, the coffee output value of Ning'er County is expected to continue growing, and the Yunnan Coffee Price Index also reflects market changes.

After years of low prices, Yunnan coffee is now showing a new situation. Since 2021, more and more Chinese homegrown new-style tea beverage and coffee brands have begun introducing Yunnan coffee beans into their menus. Along with a new wave of guochao and domestic coffee consumption enthusiasm, the number of industry practitioners traveling to Yunnan's producing regions in search of distinctive flavors has clearly increased. Consumers' demand for Yunnan beans has risen rapidly, which has also directly driven up prices.

A Yunnan "second-generation coffee farmer" said in an interview with Yicai that the spot price of Yunnan coffee beans rose by about 65% this year. In 2021, the purchase price of first-grade commercial coffee beans rose to 24 to 26 yuan per kilogram, and just after the 2022 Spring Festival it rose again to 34 yuan per kilogram.

As one of the representatives of Yunnan specialty coffee, Yunlan Estate also mentioned in the interview that this year's order volume is very large and demand for coffee beans is especially strong, but costs have already doubled or tripled. Specialty coffee beans were originally priced relatively high, and as costs rise faster, if sales prices continue to be raised they will exceed what the market can bear, instead compressing profit margins. Prices are still climbing recently, and some downstream customers are also worrying about prices and supply.

This round of soaring Yunnan coffee bean prices is closely related to the global pandemic. The pandemic caused severe delays in the supply chain between coffee-producing countries and consuming countries, extending the average delivery time from the previous one to two months to three to four months. While market supply contracted, coffee consumption grew rapidly, with China's coffee market performing especially prominently; demand exceeded supply, thus driving up Yunnan coffee bean prices.

Recently, an article online said that Yunnan coffee beans had made a "wedding dress" for some international coffee brands, and some people in the coffee industry do not agree with this. The cultivation levels among coffee farmers vary greatly. If traders need thousands of tons of coffee beans, they have no choice but to buy "beans from a hundred households," which causes unstable batches and also affects overall quality and pricing.

Yunnan certainly has natural advantages for developing the coffee industry, but it also has its own shortcomings. Related talent and industrial chain support are relatively backward, and it is far from ports, making it difficult to escape the role of a raw material producing area. In recent years, the state has established coffee trading centers in Yunnan and Chongqing respectively, intending to influence coffee trading prices. However, because Yunnan's producing region has no obvious advantage compared with other producing regions, pricing power is difficult to grasp, and the actual effect of the trading centers is limited.

In Pu'er City, Yunnan, Pu'er tea and Pu'er coffee are both local specialty crops and are among the key "50-billion-yuan industries" being developed, injecting huge potential into rural development. During the "14th Five-Year Plan" period, Pu'er plans to build itself into an important global production place for specialty coffee and high-grade standardized commercial coffee, and Asia's most influential coffee trading center and roasting and processing center. This is also the goal and task of Pu'er's coffee industry development.

To this end, Ning'er County in Pu'er City is also stepping up its efforts. According to a Xinhua News Agency report on March 1, the county achieved a total coffee output value of 278 million yuan in 2021 and is expected to exceed 300 million yuan in 2022. With continued investment in policies, projects, funds, technology, talent, and other aspects, some producing areas have introduced new Arabica varieties on the basis of the original "Catimor," gradually improving local coffee quality and thus selling at better prices.

According to data from Coffee Financial Network, the Yunnan Coffee Price Index closed at 27.56 yuan per kilogram on March 7.

Image source: Internet

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The above content is compiled by CoffeeHunters, a coffee news website.