Volcafe, one of the world's leading coffee merchants, is betting on Chinese coffee beans.
The Swiss-based coffee unit of major trade house ED&F Man Holdings signed a joint-venture with China's Simao Arabicasm Coffee Company this week to source, process, and transport coffee beans cultivated in China's southern Yunnan province to international clients.
"Chinese mild Arabica is still relatively new to the world coffee scene, but its improving consistency means it is rapidly growing in acceptance with global roasters," said Jan Kees van der Wild, global head of commodities at ED&F Man.
Volcafe's decision comes as dry spells in top grower Brazil crimp output and continued drought heightens concerns over next year's crop.
No threat to Brazil
Limited global supplies and rising prices have drawn investment, but China is not ready to compete with Brazil as a top coffee bean producer, according to Christopher Narayanan, head of agricultural research at Societe Generale in New York.
"With Yunnan producing roughly one million bags of coffee, and responsible for 95 percent of China's output, it would be hard-pressed to rival Colombia (No. 2 producer), let alone Brazil, anytime in the near future," he said. "Coffee requires a certain tropical climate, so the amount of land that China can devote to coffee groves will be limited to the southernmost latitudes."
Currently, China contributes just over 1.2 percent of global Arabica production, and less than one percent of global coffee yield. But if its output increases, China will be better positioned to help ease the world's reliance on Brazil and Colombia, analysts said.