Market Reports

Debating the quality of Natural Arabica coffee

Industry circles love to debate what beans provide the best quality in the final cup. The discussion is fuelled by changes in farming and processing practices that are making the hierarchy of beans much less obvious. Some industry experts are now saying that Natural Arabica beans, which typically command a discount on the market compared to their washed Arabica cousins, are the latest to see their spot on the stepping ladder potentially go up a notch. “The dry processing science and technology involved in producing Natural Arabicas has improved considerably in the past five years. Today we have a much better understanding of cherry fermentation and the flavour migration processes in Arabica Naturals. But we need to see this discussed much more actively on the global agenda,” says Manual Diaz, a leading international expert on gourmet Robusta and natural Arabica beans. Diaz is part of a small group of people who launched the 1st International Conference on Arabica Naturals, held in Mexico in 2008. Since then, they have held several more conferences, in places including Yemen and Brazil. “Over half of the world’s Arabica production consists of Natural Arabicas, yet for years this has been largely ignored by the industry when debating the importance of the different types of coffee,” Diaz tells GCR Magazine.  Naturals are Arabica beans dried in the cherry directly on patios, and the majority don’t go through washing or fermentation, although a portion of naturals are depulped. They are typically sold at a steep discount of up to US$0.30 per pound in the world market. Arabicas are divided into three subsections: Naturals, Colombians – which always receive a premium a few of cents above the rest – and “other milds” refer to all fully washed Arabicas not of Colombian origin. Naturals are grouped together regardless of origin, however they are predominantly supplied by Brazil. World production of Natural Arabicas in the current 2013-14 international crop cycle is forecast to reach 46.7 million 60-kilogram bags, according to the International Coffee Organization (ICO). This is equivalent to an impressive 55 per cent of the total world Arabica production of 85.4 million bags, and equivalent to 32 per cent of total world production projected to reach 145.7 million bags in the 2013-14 cycle, the ICO said in its last market report released in mid-June. “Natural Arabicas continue to be an essential component for roasters throughout the world. While other Natural Arabica origins do exist, no other delivers body as well as Brazil,” says Carl Leonard, Vice President for Green Coffee at United States-based roasters Community Coffee. Leonard argues that Brazil has proven its ability to produce high-quality Naturals and to deliver consistency in fulfilling contract obligations. He says Brazil is well positioned to remain dominant in the world of Naturals. Add to this the cost-efficient component of using cheaper Natural Arabicas from Brazil, and these beans are becoming increasingly attractive to roasters. “Arabica Naturals, especially from Brazil, will continue to be an intricate part of blends of many roasters. This will be driven by the beans’ flavour, body, and availability. Due to large volumes typically available from Brazil, cost effectiveness will most likely also be a factor,” says Leonard. Christian Wolthers, a veteran Brazilian coffee trader, agrees that Naturals not only make up an important share in the overall market, but also that a very significant share is making it into the specialty market. Some of the highest quality Natural beans available today are scoring at least 80 points on the 100-point scale developed by the Coffee Quality Institute. “Looking at the 2013-14 crop in Brazil, which we forecast to produce 53 million bags, we had about 9 million bags of strictly soft or fine cups, all scoring at least 80 points and above. Of those about 5 million are Pulped Naturals of which most fall into fine cup commercial blends,” says Wolthers, of Florida-based importers and brokers Wolthers-Douque. Scores like this show that an increasing preference for Naturals won’t just be about cost, but flavour attributes that can bring multiple benefits when added in a blend. “If we compare coffee to wine, as an example, the natural process is comparable to red wine. The grape is processed with the pulp, allowing the full body and aroma to show up in the final product when the fruit has the right flavour profile,” explains Marcelo Vieira, a coffee producer and one of the founders of the Brazil Specialty Coffee Association. “This is the same for coffee, and the natural process, preserving the entire fruit with the pulp during the processing, allows the full development of the body and the aroma, and the sweetness is preserved,” he says. Vieira says that based on the processing methods used in coffee, a fully washed coffee washes away the mucilage and provokes the loss of body and sweetness. Pulped naturals, that often are included in the “Naturals” category, can be compared to a rosé wine which has “an intermediary quality but with a much more uniform standard than naturals,” according to Vieira. For producers, Naturals are more cost efficient to process, as they don’t have to go through the expensive fermentation process to remove the mucilage. Vieira cautions, however, that it is a more risky process and should not be done without expertise. “The difficult side of natural coffee production is that for you to achieve the full quality potential, the beans must be picked at the right time and be processed very carefully. Therefore, really fine lots are a small percentage of final production, as is also the case in the wine industry,” he says. In addition to Brazil, other important origins that have won international acclaim for their Natural Arabicas are Harar, Limu and Yirgacheffe in Ethiopia, Mexican Atoyac from the state of Guerrero and smaller volumes from origins including Yemen, Uganda, Ecuador and El Salvador. Mexico’s Diaz says that these beans are “the best Arabica naturals in the world including some less known jewels like Uganda’s Drugar,” and that they go a long way in the specialty market. The use of Naturals in blends has long been practiced by top Italian espresso roasters like Illy and Lavazza. These roasters have said that the drying of the bean inside the cherry leaves a desirable natural sweetness that is ideal for espresso-based coffees. With this kind of history, Diaz says that Naturals have the potential for wider use. “Today, the processing of Naturals has improved to the extent that we are able to produce clean golden naturals, the name given in many regions to green dry processed coffee beans. This – together with the shift towards espresso-based coffee consumption, its intense aroma and sweetness and the intrinsic fruit-rich flavours and full bodied profiles – all make Natural Arabicas ideal for many roasters,” he says. Another factor in the Naturals equation is the shift in the balance of demand between Arabica and Robusta. Much has been written about the surging demand for Robusta beans in recent years. Today, Robusta accounts for between 40 – 45 per cent of total world production, compared to between 30 – 35 per cent a little over 15 years ago. Robusta’s rise has not come at the cost of a decline in demand for Arabica, which continues to grow at between 1.3 – 1.5 per cent a year in traditional consumer markets like the US and the European Union, according to ICO statistics. Rather, the surge in Robusta is attributed to the much faster growth rates of an average 3.8 per cent per year in emerging coffee markets, where growth is fuelled by instant coffee and cheaper blends using a much higher ratio of Robusta coffee. Arabica’s rally to 14-year-highs in the New York futures market in 2010 certainly didn’t help demand for Arabica. Prices stayed above US$2 a pound for over two years. This price level helped bring attention back to Naturals. “Coffee consumption has not decreased, but demand has largely moved away from washed Arabica to Brazilian-natural Arabica or Robusta, which has shifted differentials closer,” said Keith Flury, Senior Analyst for Soft Commodities for Rabobank in a 2013 report. “The 2010 – 2011 price rally in New York supported washed Arabica production” but this caused “demand moving towards Brazilian Naturals,” said Flury. He correctly predicted that the shifting demand profile in the global coffee market in 2013 “will keep washed Arabica prices and differentials under pressure and support Brazilian Naturals and Robusta markets.” General global coffee demand, meanwhile, is “likely to be concentrated in emerging and non-traditional markets as it has been for the past couple of seasons. Given the price conscious consumers in these growing markets, roasters are expected to focus on lower-priced beans,” Flury said. This will give the edge to Robusta demand, while demand in traditional markers will focus more on cheaper Naturals in their blends. Market fundamentals outside of the coffee realm might also work in favour for Naturals’ market share. “There are so many conflicting results in the market and this will cause additional uncertainty in both directions,” says Coffee Community’s Leonard. “What may actually drive coffee along with other commodities will be oil due to the continued unrest in the Middle East. This can draw more speculative investors into Index Funds where some portion of each dollar hits the ‘C’ market in New York.” Roasters will certainly be keeping a keen eye on these price movements. With Naturals from Brazil still offered at negative differentials on average 20 cents cheaper per pound compared to regular washed Arabicas, the interest for Naturals looks set to grow.

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