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Volume 8, Number 6           June 2003

 

 

Coffee Reporter Moves to Electronic Format 1

Seattle Espresso Tax Initiative. 2

NCA to Pursue Greater Cohesion with Domestic Coffee Associations. 3

NCA Task Force Interim Report 3

US Continues Studying ICO Membership. 4

Coffee and Liver Disease Reviewed. 5

Coffee Category Promotion. 6

National Coffee Drinking Trends 2003. 7

World Bank and ICO Conduct Crisis Round-Table. 9

NCA Fall Education Conference Set for October 16 & 17. 10

Look for "Coffee on the Hill" Information in July; Dates Sept. 16 & 17. 10

LIFFE Contemplates Arabica Futures Contract 10

Retail prices (all sizes/per pound) 12

The ICO composite average indicator prices. 12

 

 

Coffee Reporter Moves to Electronic Format

 

This is the first edition of Coffee Reporter in its new electronic format, part of a program to convert several NCA publications to e-format. In May, members received the first all-electronic edition of the quarterly Media Analysis Report.

 

The use of e-publishing allows members to distribute these publications to any or all appropriate personnel in their organizations quickly, making information available where needed more easily, and allowing increased coordination with members' own internal communications.

 

Coffee Reporter will continue to present timely articles on the issues that confront this industry, NCA activities and policies, and general and business news about coffee from various sources. Wider distribution to the 150,000 American coffee industry workers can help to tap their potential as grassroots ambassadors for the industry. NCA urges you to take a moment now to set up an appropriate internal distribution for Coffee Reporter.

 

E-publishing also allows easy storage, access and, when necessary, printout of these publications, as well as a significant opportunity to redirect NCA financial resources to other uses for members. A print version derived from the e-format will remain available, upon request, for those members without e-capabilities.

 

Please let NCA staff know what you think about the new electronic format Coffee Reporter, any of the articles in it, or any suggestions for articles, by writing or calling NCA or by emailing JSMolishever@ncausa.org.

 

 

Seattle Espresso Tax Initiative

 

Seattle's Ballot Initiative 77, the proposed 10 cent per cup tax on the sale of espresso-based drinks, is on the ballot for Seattle primary elections scheduled for September.

 

The initiative, which failed to satisfy Seattle ballot petition requirements in time for last fall's elections, is opposed by a coalition of Seattle coffee shop, espresso stand, and restaurant owners as well as local food industry and hotel/motel associations in an ad hoc committee, JOLT (Joined to Oppose the Latte Tax). NCA has supported that opposition.

 

NCA will shortly be sending out letters to members and others informing them how they may contribute directly to JOLT's efforts to educate and organize Seattle voters in opposition to the initiative, and of a political education fund NCA is initiating on its own to educate voters and policy makers about issues.

 

Proponents say the tax, to be imposed on lattes, cappuccinos, café mochas and other espresso-based drinks prepared and sold for immediate consumption, would be used to fund already existing children's services in Seattle. The tax would also fund a new government childcare services oversight committee.

 

But it has been pointed out by opponents that this is bad public and tax policy, for several reasons. Taxing one particular item, the first instance of this in Seattle, could set a precedent for additional specialty taxes on other items -- what will they tax next? Many Seattle residents also feel that funding for childcare programs is too important to be dependent on the sale of espresso, which is completely unrelated to childcare, and therefore funding generated could well vary in ways that have no relationship to increased or decreased needs for funding.

 

"This is not only bad public policy for Seattle, it sets a precedent for bad tax policy in every community throughout America," said NCA President Robert Nelson." Food and beverage retailers, in general, have historically been the target of ill-thought out tax schemes that do more harm than good; this particular tax will result in diminished economic activity at the same time that the community is climbing out of an economic downturn. Voting against the Seattle espresso tax initiative is not a vote against children’s services, it is a vote against bad fiscal policy. "

 

It is expected that organized labor may lend its support to the proponents' campaign in hopes that they will be successful in unionizing childcare workers subsequent to the tax scheme efforts. NCA has also learned that the proponents may be undertaking a national fundraising campaign in hopes that they can garner support for not only the Seattle initiative, but for future similar initiatives in other communities.

 

Those wishing to assist the committee opposing this initiative may contribute by mail direct to JOLT, at PO Box 21671, Seattle, WA 98111. The Federal Tax ID numberber is 04-3704984, though contributions are not tax deductible.

 

 

NCA to Pursue Greater Cohesion with Domestic Coffee Associations

 

A major long-term strategy of NCA is to strengthen the cohesion and coordination between the various organizations representing the coffee industry in North America, thereby avoiding duplication of efforts and increasing the industry’s effectiveness. At its June meeting, the NCA Board of Directors voted to accept a plan proposed by the Executive Committee to create a North American Coffee Council. The purpose of the Council would be to identify common goals and interests between the various North American coffee associations, and develop common positions where possible. Under the plan, the Council would consist of the chief executive and two Board members of each organization. Prospective members, in addition to NCA, include the Green Coffee Association, the Coffee Association of Canada, the Specialty Coffee Association and the Southern Coffee Association.

 

NCA President Robert Nelson informed the Board that the Green Coffee Association has already proposed a staff-level meeting to discuss how more synergy can be created between the two organizations.

 

The Board authorized Mr. Nelson to begin the process of communicating with these organizations to determine their interest in developing the Council.

 

NCA Task Force Interim Report

 

The NCA Quality Task Force made a preliminary report to the June Board of Directors meeting on the planning and work it has completed to date.

 

The Task Force was established by the Board in March to explore opportunities to support producer quality objectives in a manner that preserves the widest array of consumer choices. The Task Force was also charged with identifying and examining approaches adopted by International Coffee Organization consuming member countries with regard to ICO resolution 407, which prohibits the export of green coffee above certain defect levels.

 

Regarding adopted approaches, the Task Force reported that both Europe and Japan have voluntary programs to report exports to them of coffee that is not compliant with Resolution 407. These are administered through their respective national coffee associations, the European Coffee Federation and the All Japan Coffee Association. To date, two reports have been filed by the All Japan Coffee Association with the Japanese government, which passed them on to the ICO.

 

The Task Force also reviewed compliance efforts in producing nations. Some countries have adopted administrative procedures and others have adjusted grading procedures as approaches to complying with ICO Resolution 407. Some countries have taken preliminary compliance steps but still need to implement legally binding directives, and other counties are seeking technical or financial assistance to implement compliance measures.

 

With regard to supporting producer quality objectives in a manner that preserves the widest array of consumer choices, the Task Force has been working to create a framework to accomplish this. It has identified a preliminary list of options for further consideration and discussion as possible approaches to this objective, and has organized these options according to the area they each address, such as Education and Government Policy.

 

Upon completing its evaluation and prioritization of the identified options, the Task Force will submit its final report and recommendations to the Board of Directors for its review and input. Final approved options will be assigned to the suitable NCA committee for further consideration and execution, where appropriate.

 

 

US Continues Studying ICO Membership

 

NCA President Robert Nelson; Specialty Coffee Association of America (SCAA) Executive Director Ted Lingle; and key coffee industry lobbyists from Kraft Foods, Sara Lee Coffee & Tea Foodservice, Nestlé and Procter & Gamble met for a second series of conferences on June 18 and 19 with senior Administration officials to present industry viewpoints and answer questions on why it is essential for the U.S. to rejoin the International Coffee Organization (ICO).

 

This is part of an ongoing process of interagency meetings and communications among the various Administration departments charged with evaluating the decision of the U.S. rejoining ICO or not that have been taking place throughout June.

 

A May 30th article in The Wall Street Journal implying that the U.S. had decided not to join the ICO is incorrect. The fact is that no decision has been made and it is expected that the process of reaching a final decision may go on throughout the summer.

 

In the meetings this month, Mr. Nelson and the other coffee representatives met with an interagency group including officials from the State Department, the U.S. Trade Representative's office (USTR), the Department of Agriculture (USDA) and the National Security Council (NSC). They also met separately with Ambassador  Thomas Shannon, Special Assistant to the President and NSC Senior Director for Western Hemisphere Affairs, and John Sammis of the NSC. Two additional separate meetings were held with officials of the U.S. Agency for International Development (USAID) Bureau for Africa, and the USAID Bureau for Economic Growth, Agriculture and Trade. Meetings were also held with key Congressional offices.

 

The coffee industry representatives, along with ICO Executive Director, Nestor Osorio, and Colombian Coffee Federation General Manager, Dr. Gabriel Silva, previously met in April with Administration officials to explain the need for the U.S. rejoining ICO, as reported in the May issue of Coffee Reporter.

 

"What is needed is coherent, cohesive global strategy that addresses rural development by focusing on the current situation in the coffee sector, thereby ensuring the future sustainability of the industry," said Mr. Nelson. “Such a cohesive strategy will not be developed and executed without the authoritative leadership of the United States, and NCA believes that ICO needs to be part of that strategy. This is an extremely important decision with very important consequences, for the health of the global coffee industry and for our country's ability to influence the future of the industry.”

 

 

Coffee and Liver Disease Reviewed

 

There is increasing scientific evidence to show that coffee may provide significant protection against the development of liver disease.

 

In a presentation at the International Coffee Organization-sponsored Positively Coffee meeting at the Tea and Coffee Symposium, held in Rome earlier this month, Professor Amleto D’Amicis, Head of the Nutrition Information Unit at Istituto Nazionale di Ricerca per gli Alimenti e la Nutrizione (INRAN), in Rome, highlighted how coffee drinking specifically may be protective against:

 

§         Cirrhosis of the liver (a disease causing progressive damage and scarring of the liver tissue and function)

 

§         Gallbladder disease - by reducing the risk of gallstone formation.

 

§         An increase of liver enzyme activity. A high liver enzyme activity is a recognized indicator that there has been deterioration in the functioning of liver cells and possible development of disease in the liver.

 

“Such significant data shows us how drinking coffee could provide a real benefit to our health”, said Prof D’Amicis. In his presentation, Professor D’Amicis highlighted one study (Klatsky 1992) that showed that coffee drinking is inversely related to alcoholic cirrhosis risk. This study, involving over 128,000 adults, showed that persons drinking four cups of coffee per day are at one fifth the risk of cirrhosis of those of who did not drink any coffee.

 

More recent studies (Corrao 2001) confirmed the findings that it is specifically coffee, but not other beverages containing caffeine, that may be the key factor in inhibiting the onset of both alcoholic and non-alcoholic cirrhosis of the liver.

 

In another large study (Leitzmann 1999), results showed that men who regularly drank two to three cups of coffee per day – filtered, instant or espresso - had about a 30-40% reduction in risk of gallstone disease. For men who drank four cups per day, the reduction was even more significant – the risk was cut in half. Other study results (Leitzmann 2002) have demonstrated a similar positive effect in women.

 

Full citations for the articles referred to are:

 

1.      Klatsky AL, Armstrong MA. Alcohol, smoking, coffee, and cirrhosis. Am J Epidemiol 1992 Nov 15;136 (10):1248-57

 

2.      Corrao G, Zambon A, Bagnardi V, D'Amicis A, Klatsky A; Collaborative SIDECIR Group. Coffee, caffeine, and the risk of liver cirrhosis. Ann Epidemiol 2001 Oct;11 (7):458-65

 

3.      Leitzmann MF, Willett WC, Rimm EB, Stampfer MJ, Spiegelman D, Colditz GA, Giovannucci E. A prospective study of coffee consumption and the risk of symptomatic gallstone disease in men. JAMA 1999 Jun 9;281(22):2106-12

 

4.      Leitzmann MF, Stampfer MJ, Willett WC, Spiegelman D, Colditz GA, Giovannucci EL. Coffee intake is associated with lower risk of symptomatic gallstone disease in women. Gastroenterology 2002 Dec;123 (6):1823-30

 

 

Coffee Category Promotion

 

At its June meeting, the NCA Board of Directors approved a plan proposed by the NCA Public Relations Committee to conduct research as the first phase of a campaign to increase consumption of coffee across the entire category. The proposed research program is designed to identify:

 

 

 

 

"NCA has a long-time commitment to promoting awareness of scientific studies examining the health and well-being implications of coffee, which will continue," said Director of Communications Jay Molishever. "This research will attempt to determine where to put additional resources, whether into more health-science messages, or other areas."

 

"The Public Relations Committee looked at this issue and realized that the initiatives regarding health are driven by the very good news that exists about coffee and health, but we have very little consumer point-of-view research about whether that good news actually influences them. Do people who don't drink, or who limit their coffee intake, because of their concerns about health, actually respond to positive science, or are their minds made up?" he explained.

 

The Public Relations Committee’s program involves three phases: An in-depth examination of the data NCA already has collected in National Coffee Drinking Trends 2003, to determine the most promising audiences; focus group studies with randomly recruited members of those audiences to determine what issues and concerns would actually move them to change consumption behavior for the better; and quantitative internet research among thousands of respondents to test the messages discovered and developed during the focus groups.

 

Based on its findings, the Public Relations Committee will recommend implementation options to the Board for its consideration.

 

The NCA Public Relations Committee consists of communications and scientific personnel from member companies.

 

 

National Coffee Drinking Trends 2003

 

While the number of American adults who identify themselves as drinking coffee daily or at least occasionally is the highest it has been in more than 5 years -- 166.6 million, or 79 percent, up 5.4 million from last year -- the segments and dynamics of this group are shifting, according to National Coffee Drinking Trends 2003 (NCDT), published this month. 

 

How are a second straight year of rising unemployment, changing cultural patterns, aging of generation X-ers and other factors affecting American's coffee-drinking patterns?

 

The gains of recent years in the resurgence of coffee appear to be holding at or close to the higher levels achieved, the report finds, though continued growth appears to await an economic upturn. 

 

National Coffee Drinking Trends, produced by NCA, surveys consumption patterns in a wide variety of situations and categories, tracking them for over five decades. It provides operation-critical information about shifting consumption habits -- both traditional and gourmet coffee beverage -- which have never been more in flux than they are now.

 

"The trend data banks available through National Coffee Drinking Trends 2003, and the high reliability of the data due to the large sample size, have made it one of the most valuable and eagerly anticipated studies in the coffee industry," NCA Director of Membership Development and Marketing Steve Wolfe remarked.

 

According to NCDT 2003, the increase in daily or occasional (within the past year) coffee drinkers is matched by an increase in daily or fairly regular (within the past week) drinkers, who grew by 3.7 million to 135.6 million, or 64 percent.

 

Within these two sets, 108.3 million, or 51 percent of Americans, drink coffee daily. This compares with 52 percent the year earlier, according to the study, paralleling a trend seen in consumption of soft drinks (59 percent in 2002 vs. 58 percent in 2003) and juices (43 percent in 2002 vs. 42 percent in 2003), which National Coffee Drinking Trends 2003 tracks for comparison. In 1995, only 47.4 percent of Americans said they drank coffee daily, according to the survey.

 

Ongoing relatively high levels of unemployment seem to play a role in the current phenomenon, possibly accounting for a sudden change in workplace consumption (16 percent in 2003 compared with 20 percent in 2002) after several years of fairly consistent workplace share of daily cups. Also affected are the youngest drinkers, 18-24, whose coffee drinking patterns were among the fast growing until the last two years (7 percent in 2003 compared to 13 percent in 2002), and who have the highest levels of unemployment (15.9 percent among 18-19 year olds, and 9.3 percent among 20 - 24 year-olds at the time of the study, compared with 5.7 percent overall).

 

Time of day, in-home versus out-of-home, and place of purchase patterns are also shifting in ways that perhaps reflect the specific economic fact that there are fewer workers around the all-day workplace coffee station, the report found.

 

For additional information on National Coffee Drinking Trends 2003, prices and ordering, visit the NCA website (www.ncausa.org) or call (212) 766 4007.

 

 

 

 

World Bank and ICO Conduct Crisis Round-Table

 

An international high-level Round-Table on the coffee crisis was held in London last month, organized by the International Coffee Organization (ICO) and the World Bank.

 

The Round-Table brought together over 250 delegates including producers from developing countries, government officials, experts from international organizations, advocacy groups and industry representatives to discuss alternatives such as diversification, quality, added value and market development.

 

Participants urged the U.S. Government to rejoin the ICO and called on wealthy consuming countries to reduce their internal agricultural subsidies and tariffs in order to allow potential diversification for those producers attempting to move to other crops.

 

"The real solution is not within the coffee industry, but with the co-operation of developed nations to open up their highly protected agricultural markets to emerging markets," the Financial Times (FT) quoted World Bank Director of Agriculture and Rural Development Kevin Cleaver at the Round-Table.

 

According to FT, Mr. Cleaver said opening up North American, European and Japanese agricultural markets would be difficult. The developed world spends $300 billion a year on subsidies to its farmers and in turn gives the developing world $8 billion a year in agricultural aid, he noted.

 

International Coffee Organization (ICO) Executive Director, Nestor Osorio, spoke to the Round Table about the need to "pursue the promotion of consumption through various means, including the improvement of quality, and to reduce dependence through diversification," according to the ICO website. "We will need to establish the capacity of international agencies and the private sector to work on concrete actions in areas like credit and risk management, and what measures can be taken to bring producers once again into the profit-zone. The ICO is ready to coordinate the successful implementation of these ideas."

 

Others called on wealthy countries to share the burden of the present coffee crisis that affects the living standards of 125 million people mainly in small-holdings in developing countries.

 

Participants agreed that a long-term solution of the crisis needs to be part of an integral strategy for the agricultural and rural sector.

 

"There is no simple solution, there is no silver bullet," said World Bank's Mr. Cleaver. "There is a consensus that an integrated package which includes improvement in coffee quality, increase in consumption in non-traditional markets, strengthening of the bargaining and marketing powers of producing countries and support to diversification should be implemented."

 

Innovative solutions such as the facilitation of access to price risk management products to groups of small farmers in several Latin American and African countries, and new marketing strategies for quality improvement and increase of consumption were also showcased at the meeting.

 

NCA Fall Education Conference Set for October 16 & 17

 

This year's program for the NCA Fall Education Conference, to be held October 16 and 17, at the Metropolitan Hotel, in New York, is set.

 

There will be two distinct educational tracks: one focusing on production, emphasizing quality from tree to cup, and the other focusing on business, covering the latest trends and news from the frontlines of coffee marketing. This year’s conference will feature such topics as coffee and health, coffee in the new world of biosecurity concerns, certified coffees, origin coffees, coffee and the internet, new packaging options, corporate responsibility, specialty robusta opportunities, the right water, and much more.

 

Registration materials will be mailed in July. Or, call NCA at 212 766 4007 for further information. Check the NCA website by mid-July for full information and online registration.

 

Look for "Coffee on the Hill" Information in July; Dates Sept. 16 & 17

 

Information on how members can participate in NCA's "Coffee on the Hill" should be arriving in your mail in the next few weeks. The event, in which coffee industry professionals will visit Washington to let elected officials know their views on the many critical issues now impacting the coffee industry, is set for Sept. 16 & 17. Please plan to be there if possible. Your voice, together with other members, can make a difference. 

 

For any questions, contact NCA at (212) 766-4007.

 

 

LIFFE Contemplates Arabica Futures Contract

 

Coffee brokers and traders reacted positively to a report this month that the London International Futures and Options Exchange (LIFFE) is contemplating the introduction of an arabica coffee futures contract, saying it would benefit participants throughout the coffee market and should lead to a sharp increase in the volume of coffee futures traded worldwide, according to a report by OsterDowJones from London.

 

Malcolm Wall Morris, LIFFE Business Development Manager for Commodity Products said the Exchange is considering the introduction of an arabica coffee futures contract to run alongside its existing robusta contract. At present, players wanting to trade arabica coffee futures use the contract at New York's Coffee, Sugar and Cocoa Exchange (CSCE), but many traders believe there is sufficient demand to operate a separate arabica contract on LIFFE, ODJ reported.

 

The proposed contract will be based on the delivery of washed and unwashed coffee but the exact quality specifications have not yet been decided, Mr. Wall Morris is reported to have said. Only washed coffee is currently delivered against the arabica contract at New York's Coffee, Sugar and Cocoa Exchange. Mr. Wall Morris said the LIFFE arabica contract "would run complementary to the CSCE." He said the idea for an arabica contract arose from feedback from users who have expressed a desire to be able to trade arabica coffee in London, the report said.

 

The report stated an arabica contract on LIFFE would be traded electronically rather than on an open-outcry basis, a factor which should also help to cut out floor brokerage fees. There is a broking fee of around $4 to $5 per lot to trade on the CSCE floor, according to OsterDowJones, a cost that is not incurred when trading electronically.

 

Another possible benefit of two similar contracts in New York and London, the report said, would be that it should be easier to trade the arbitrage -- the simultaneous purchase and sale of coffee between the two markets to take advantage of any price discrepancy -- between LIFFE and CSCE arabica contracts than it currently is with a LIFFE robusta and CSCE arabica contract. This should also allow traders to offset initial margins from one exchange against the other, cutting down the size of the cash deposit. Currently, a deposit must be made into margin accounts for both markets at the time an order is placed.

 

One major barrier still to be overcome, the report noted, is an adequate grading system. An industry analyst said the grading system currently in place for LIFFE robusta coffee would not easily facilitate an arabica contract, and that it would need to be redeveloped to accommodate what is expected to be a more widespread list of grades compared to those used for robusta. Mr. Wall Morris said a grading system is being investigated.

 


Retail prices (all sizes/per pound)

 

Ground roast

 

 

April '03

March '03

April '02

March '02

U.S. Avg

3.008

2.933

2.976

2.859

Northeast

3.466

3.261

3.471

3.272

Midwest

2.783

2.591

2.509

2.499

South

2.761

2.724

2.680

2.757

West

3.201

3.261

3.421

3.914

 

Source: U.S. Bureau of Labor Statistics

 

 

 

The ICO composite average indicator prices

 

 

Colombian Mild

Arabicas

"Other Mild"

Arabicas

Brazilian & Other

Arabicas

Robustas

Composite Price

December

67.92

64.75

46.70

38.68

51.68

January

69.68

65.22

49.14

42.75

54.04

February

69.60

67.60

48.54

42.35

54.07

March

61.82

61.66

43.77

38.26

49.61

April

66.12

65.35

48.71

38.68

51.87

May

67.56

66.47

51.06

38.90

53.19