In April of this year, Yunnan's coffee industry was shrouded in rumors of "unsold coffee beans," which for a time unsettled coffee farmers and the industry. But what was the truth? The main production area of Pu'er had only 3,000 to 4,000 tons of coffee beans left, including some of poor quality. Truly high-quality beans remained in short supply, and quality was the most worrying issue behind this turmoil. This article takes an in-depth field visit to Pu'er, sorting out the price trends of small-bean coffee, the origins of the unsold rumors, and the real situation of middlemen and coffee farmers amid this price fluctuation, and speaks with "Coffee Madman" Liu Minghui to restore the current state and future of Yunnan coffee.
In April, Yunnan's coffee industry seemed to experience a roller-coaster ride from heaven to hell. Shrouded in news of "unsold coffee beans," coffee farmers and the industry were once thrown into panic. Yet by the end of April, statistics showed that the main production area of Pu'er had only 3,000 to 4,000 tons of coffee beans left, including some lower-quality beans.
"Truly high-quality coffee beans are still in short supply." Behind the "unsold" coffee beans, quality problems are actually more worrying.
In this round of turmoil triggered by falling prices, the ones who suffered the heaviest losses were actually the middlemen, while the coffee farmers who actually grew the beans still maintained their returns.
This year, affected by increased coffee production in Brazil, the supply-demand balance was broken, and international coffee prices opening high and then falling low is a normal phenomenon. However, as rural labor continues to shift away and planting costs rise, coffee bean prices may continue to run at a high level in the future.
Under the shade of Pu'er's coffee trees, the least pleasant story in April was the rumor of "unsold coffee beans."
Liu Minghui, founder and chairman of Yunnan Aini Group, known as the "Coffee Madman."
Throughout April, Yunnan's coffee industry was shrouded in rumors of "unsold coffee beans," which at one point triggered panic among coffee farmers and the industry. Yet just a month earlier, Yunnan coffee had been like a darling, sought after by Starbucks, Nestlé, and some speculative capital. One month in heaven, one month in hell. At the end of April, when a reporter made an on-site visit to Pu'er, a staff member of the Pu'er Coffee Office received a call from a friend asking whether coffee beans were unsold this year and what the market would be like next year. That friend had just planted 500 mu of coffee trees last year.
On April 12, the Yunnan Coffee Industry Association reported the findings of its survey of Yunnan's main coffee-producing areas. The survey showed that Yunnan's coffee bean output reached 50,000 tons in 2011 and was expected to reach 60,000 tons this year, but prices had fallen by nearly one-third. Preliminary statistics showed that at that time more than 20,000 tons of coffee beans in major production areas such as Pu'er, Baoshan, and Xishuangbanna had not yet been purchased. But for the Pu'er production area alone, Gao Yingmin, a staff member of the Pu'er Coffee Office, told reporters: "Current statistics show 3,000 to 4,000 tons remain, including some poor-quality coffee beans." What exactly happened to Pu'er coffee?
"Good coffee is still in short supply"
Generally speaking, the biggest characteristic of being unsold is that the selling price equals or is lower than the cost. At that time, the purchase price of coffee beans in Pu'er remained at around 20 yuan/kg. Survey data from the Yunnan Coffee Industry Association showed that the production cost of growing coffee in Yunnan was 13 to 15 yuan per kg, and when the purchase price was above 15 yuan/kg, growers still had some profit margin.
Several coffee companies purchasing locally in Pu'er were still continuously receiving coffee beans from farmers. As the largest buyer in the Pu'er area, Nestlé said in a reply to this newspaper: "In 2012, after exceeding its annual coffee bean procurement plan, Nestlé further increased its purchase volume, with total purchases this year at about 10,000 tons." It is understood that Nestlé increased its purchase volume by another 2,000 tons on the basis of last year's volume and planned to continue expanding procurement over the next five years.
As a raw material supplier for Starbucks, as soon as the "unsold" rumor emerged, Liu Minghui, founder and chairman of Yunnan Aini Group, also said on his Weibo that he would purchase qualified coffee beans from coffee farmers across Yunnan at good prices for quality beans. In an interview with this newspaper, Liu Minghui said: "If there are still 10,000 tons of coffee beans on the market now, it still cannot satisfy Aini's orders in Europe, America, and Canada, but right now it is very difficult to buy good coffee beans."
Behind coffee beans "being unsold," quality problems are what worry people even more.
"Truly good-quality coffee beans are still in short supply," Liu Minghui said. Li Gongqin, deputy secretary-general of the Yunnan Coffee Industry Association, also believed that because prices had risen for ten consecutive years, both good-quality and poor-quality coffee beans could be sold, leading coffee farmers and coffee companies to neglect quality control and checks.
"The ones who lost the most were the middlemen"
It is understood that the purchase price of coffee beans in the Yunnan market is set according to the New York coffee futures trading price, and as the same small-bean coffee, its price trends follow the price movements of Colombian coffee beans.
Data from the International Coffee Organization website show that in 2003 the price of Colombian coffee beans fell to its lowest level since 2000, with an annual average price of 48.34 cents/lb. After that, prices began to rise, and by 2011 they had once risen to 244.64 cents/lb, reaching a historic high.
Liu Minghui analyzed that the normal price of coffee should remain at 150 cents/lb. In previous years coffee output was once偏低, and from 2009 to 2010 coffee reserves were consumed in large quantities. In 2011, in order to replenish reserves, increased demand for coffee beans drove prices up. In addition, in 2011 Brazil, an important coffee-producing region, experienced an off-year climate, causing coffee bean output to fall to 43 million bags (60 kg/bag). In 2012, Brazil was in an on-year climate, with coffee bean output increasing by 15 million bags to 58 million bags for the year, setting a historic high.
Last year, international coffee prices experienced a rare major bull market. In April last year, coffee prices reached their peak in nearly 30 years, with spot transaction prices in the Yunnan market reaching 41 yuan/kg. By comparison, current coffee bean prices have almost halved. This year, most coffee farmers mistakenly thought price trends would be the same as last year, so they held back from selling when the coffee beans should have been sold, yet never saw the expected price increase.
On the other hand, some middlemen hoarded quite a lot of coffee beans during this process. It is understood that from September to December last year, the purchase price of coffee beans was 25 to 30 yuan/kg, while the price middlemen paid for cherries at that time had already reached 4 to 5 yuan/kg. Based on the ratio of 7 kg of coffee cherries producing 1 kg of coffee beans, the cost price of coffee beans at that time had already reached 28 to 35 yuan/kg. "Because prices fell later, the ones who suffered the heaviest losses in this year's coffee turmoil were still the middlemen, while the coffee farmers who directly grew the beans still benefited," Liu Minghui said. During interviews, several industry insiders also confirmed this account.
Moreover, due to limited storage conditions and failure to process in time, the hoarded coffee beans became moldy. What is worse, last year's high prices led some coffee farmers and export companies to chase only immediate profits and mix grade 2 and grade 3 defective coffee into grade 1 beans for sale, resulting in coffee beans failing to meet quality standards.
"This year, affected by increased coffee production in Brazil, the supply-demand balance has changed, and it is normal for international coffee prices to open high and then move lower. The market changes rapidly, but as rural labor shifts away and planting costs rise, it is unlikely that coffee bean prices will fall again to 120 cents/lb in the future; prices may remain high," Liu Minghui said when discussing future coffee price trends.
Coffee People
The Coffee Saint of the Plateau
Starting from downtown Pu'er and driving deep into the jungle along a "twisting and turning" mountain road, after about a two-hour drive one can reach a village called Manzhongtian. In this place more than 100 kilometers from the national border grows a coffee bean whose quality approaches that of Blue Mountain, and global giant Starbucks uses this place as a raw material supply base. The owner of this Manzhongtian coffee estate is a true Aini man named Liu Minghui, and he is also a true "Chinese cowboy."
Liu Minghui, with dark skin, strong and sturdy, always in a T-shirt and jeans—even when meeting Starbucks' global president he still dressed this way, and the other party appreciated exactly this kind of spontaneity and ease.
In 1993, Liu Minghui resigned from a government department and went into business, opening a restaurant with ethnic flavor on Dianchi Road—Aini Villa. Today, he owns 6 restaurants, 2 coffee planting bases, 2 coffee processing plants, 4 pastures, and a beef slaughter and processing plant. Starting in 1997, Liu Minghui set foot in the United States, selling Chinese coffee there. In a sense, for Yunnan coffee to go global, Liu Minghui is one node that cannot be ignored.
Liu Minghui's image in the media always includes his signature western cowboy hat. He defines himself as a "cowboy," labels himself as an Aini coffee person, and says, "Aini exists because of love for you."
Whenever he talks about coffee, Liu Minghui seems activated, talking endlessly and emotionally, even refusing to let others interrupt. His hearty laughter and passionate emotions are especially penetrating, and the people around him are instantly infected. Regarding some coffee farmers adulterating beans and causing the quality of Pu'er coffee to decline, Liu Minghui was quite angry, saying: "That is tantamount to chronic suicide; no one can deceive people forever." He is just such a person of strong feelings with a "cowboy personality."
He said: "Everyone who has met me likes me." His spontaneity reveals the charm of a middle-aged man. He has a nickname, "Coffee Madman," but he does not avoid such a title; instead, he takes delight in talking about it. His team is mostly young returnees, all spontaneous and free-spirited, and they decided to follow him mostly because they appreciate him.
At 47, Liu Minghui is also an out-and-out Weibo addict. Every day he is active on Weibo exchanging all kinds of coffee-related matters with many fans, and he even sells coffee on Weibo. A chairman selling coffee on Weibo—Liu Minghui may be the first. On Weibo he labels himself with "travel, freedom, movies." In reality, he advocates freedom and likes traveling all over the world, and it is precisely because of this that a coffee saint brought Yunnan coffee to the world.
Staff reporter Zheng Lihong, intern reporter Fang Yan/text; photos on this page: staff reporter Li Jinhong/photography
China Coffee Trading Network: www.gafei.com
The above content is compiled by CoffeeHunters, a coffee news website.
