Yunnan brews plans for expansion of coffee crop

A Chinese farmer harvests coffee beans at a coffee garden in Xinzhai village, Lujiang town, Baoshan city, Southwest China's Yunnan province, Jan 7, 2010.[Photo/IC]

Yunnan's coffee industry, buoyed by high global prices, aims to more than double its output by 2020, according to the province's coffee association.

Reflecting China's rise as an emerging international bean supplier, multinationals are stepping up investment in the nation's burgeoning coffee industry.

Yunnan's coffee production accounts for about 1.5 percent of the global total at about 120,000 metric tons, "but we estimate that by 2020, production will reach at least 250,000 tons and account for 3 percent of global production," said Hu Lu, deputy secretary-general of the Coffee Association of Yunnan.

The southwestern province, with high altitudes and a temperate climate, accounts for about 98 percent of China's coffee output. Hu said that the combination of good yields in the province and high international prices this year means Yunnan coffee farmers will reap a bumper harvest.

The price of coffee has jumped to about 23 yuan ($3.70) per kilogram from 13 yuan in 2013 and the association has forecast prices will remain at 25 to 35 yuan per kg over the next two years. Prices have been driven up by a drought in top producer Brazil.

A strategy to expand the harvest is to increase the planting area. The Agriculture Department of Yunnan said the coffee-growing area is set to rise to 167,000 hectares from 119,333 hectares in 2013.

Sustained prices are also likely to encourage farmers to switch to cultivating coffee. Hu said that profits from coffee this year have been "considerably higher" than for other main crops such as sugar, corn and even tea.

Most of Yunnan's coffee is grown near Pu'er, famed for its tea, but coffee's status has been rising along with investment from large overseas companies.

Nestle SA, one of the pioneers of coffee in Yunnan, launched its first Nescafe Coffee Center in the Pu'er Industrial Park on Dec 12. The center aims to provide training and technical support to farmers and better quality control through its laboratory and storage facilities.

Lu Han, director of the Yunnan Coffee Bureau in Pu'er, said that because the industry depends on exports to sell 80 percent of its production, support from multinationals is crucial.

"The development of the local coffee industry necessarily requires being driven by global heavyweights such as Nestle and Starbucks. Only through purchases by these international companies can we solve the problems in selling Pu'er coffee and develop the trade further," said Lu.

In October, Volcafe, the coffee arm of London-based commodities trader ED&F Man, set up its first export operation in the country through a joint venture with Chinese coffee exporter Simao Arabicasm Coffee Co.

Mark Furniss, Volcafe's business development director for Asia, said with its competitive prices and potential for yield and area growth, China has a place in the global coffee market. "There is room for coffee like that from China to come onto the world stage," he said.

But the industry still faces the challenge of consistency of supply and quality. "Consistancy is a strong indicator of the professionalism of commodity growth and it will help encourage roasters to include China as a component of their blends," said Furniss.