Chapter 11

Myanmar coffee market survey

A study of Myanmar coffee marketing, conducted by the FAO project during the 2003 to 2005 seasons, gathered information on coffee production and existing coffee market channels. This information has helped to outline key elements of a strategy for improved international marketing of high quality Arabica coffee from Myanmar.

Summary

Production. Government sources estimate the present coffee production of Myanmar at 3615 tons for the 2004/05 coffee season, comprising 2611 tons Arabica and 1004 tons of Robusta (see Tables 11.1 and 11.2). This equates to 0.05% of world production.

Markets. Based on official figures in Tables 11.2 to 11.5, most coffee is exported via border trade to neighbouring countries, with yearly variation in export volume. The three years of border trade data show a large export of Robusta in 2002/03 that appears to be at least double Robusta production which is unexplained, except perhaps by re-exports of imported Robusta. International exports via Yangon for the two years of data provided were 95% Robusta, which may indicate the ease of transport of Robusta to Yangon from the southern production areas while Arabica is mostly produced in the North and is sold as border trade.

Quality. It is estimated, that over 80% of Myanmar coffee is produced by smallholders using the most rudimentary methods of processing. Typically, the coffee is dried in the cherry to produce 'natural' coffee and is then hulled by pounding. The small amount of coffee that has reached international markets to date has created an image of generally low quality coffee from Myanmar. This coffee project assessed a wide range of Myanmar Arabica coffee and had a range of well-processed coffee samples from Myanmar sent to international buyers for tasting and evaluation. The general consensus was that these coffees have potential in the Premium and Specialty coffee market as defined by the Specialty Coffee Association of America (SCAA). See Chapter 7 for quality assessment details.

Plans. The Myanmar Government has plans for further extensive coffee plantings as described in Table 11.6. This information was extracted from the document, Strategic Vision for Development of the Coffee Industry of Myanmar, presented by Myanmar Farm Enterprises (MFE) at the FAO Coffee TCP wrap-up seminar in May 2005. The plans will require clear actions and strategy to ensure producers can effectively transport, process and market their product.

Production and marketing. Exports and border trade figures vary markedly over the three years of available data - no reason is given for the wide variation. Figures of total production against consumption and exports do not balance. This may mean that either production is much lower than estimated or there are unrecorded exports, or that local consumption is much higher than estimated or coffee is being imported and re-exported.

Conclusions. While every indication points to Myanmar as a likely Specialty or Premium high quality coffee producer, investor and smallholder plantings will be governed by risk with respect to investment costs and political stability and this may slow development. The benefit/cost studies and cash flows found in Chapter 12 indicate good profitability and returns for Arabica coffee in Myanmar provided that stability prevails in the country and the economy.

Table 11.1. Production/exports of Myanmar coffee (tons)

Market strategy - recommendations

The Myanmar coffee industry is in its infancy. There is an opportunity for it to grow into a viable component of the agriculture sector in Myanmar and to benefit farmers. Private investors are taking the lead role in driving the coffee industry by planting new coffee farms. However, individual investors have limited knowledge of coffee marketing and need assistance. The Myanmar Government has a key responsibility in providing the enabling environment to develop the coffee industry and ensure there are marketing channels for investors to transport, process, market and export their produce. It is very difficult to develop a marketing strategy until there is sufficient quality of coffee to market. It is recommended that future Myanmar Government marketing strategies consider the following points:

Quality issues. The Myanmar Government should investigate developing and implementing coffee export standards and quality certification to give consistency to the coffee exported from Myanmar. Consistency is as vital as quality to most international buyers.

Processing facilities. The Myanmar Government should actively assist producers to process, market and export high quality coffee. This will boost world positive market awareness of the Myanmar coffee industry. Assistance with facilitation of machinery importation procedures and advice from CRIETC to producers and processors.

Market focus. The Myanmar coffee industry must strive to understand Specialty coffee market requirements. The Myanmar Government must help develop a 'market driven' coffee industry, which provides coffee that meets the demands of this market.

Market information. The Myanmar Government should investigate methods to improve communication about the world coffee market prices for all Myanmar coffee growers, to ensure fair prices are paid to the growers.

Minimum coffee volumes. A volume of 500 tons of high quality coffee is considered a minimum requirement for beginning a credible program to market new Specialty coffee. Coordination of coffee exports will be needed to achieve these minimum volumes, which initially will be derived from a range of growers.

Myanmar Coffee Association. The Myanmar Government should consider forming a Myanmar Coffee Association as a mechanism to create dialogue with the coffee industry. Participants could include producers, exporters and government departments.

Coffee production

Coffee production is spread over a large number of States and Divisions in Myanmar. Arabica tends to be produced in the uplands in the north while Robusta is predominantly produced in the lowland southern areas. Smallholders (average holding is less than one acre), produce 80% with the remainder from larger coffee estates, public and private, as well as larger smallholders with a few acres. This proportion is changing as a large area of coffee has been planted under the Myanmar Government coffee development strategy. Arabica production is approximately 66% while Robusta is about 33% of total production. Myanmar's production of 3600 tons equates to about 0.05% of world production.

(Source: Myanmar Department of Statistics)

Production data provided by MFE, gathered from the Myanmar Department of Statistics.
Production data for 2002/03 season: Combined Arabica and Robusta 2417 tons.
Production data for 2003/04 season: Combined Arabica and Robusta 3012 tons.

Table 11.2 Coffee production in Myanmar for 2004/2005

Marketing

Coffee production is marketed via three main channels: 1) domestic consumption, 2) exports to neighbouring countries commonly called 'Border Trade' and 3) exports through the main port of Yangon which is commonly called 'International exports'.

Domestic consumption. Discussions with leading roasters in Myanmar, estimate that domestic consumption is a maximum of 750 tons per year but there is no central database to verify this information. The three largest producers of roast and ground coffee (Premier, Maha and MFE) produced about 350 tons of coffee in 2004/05 for local consumption. There are a number of unregulated small roasters who process up to 10 tons but no figures are available for these.

Exports. Export figures have been gathered from the Ministry of Commerce and the Department of Border trade. Seasons refer to the Myanmar financial year, which runs from 1 May to 31 April.

International exports

In 2003/04, 186.35 tons of coffee was exported as green bean by five different companies in seven shipments ranging from 0.35 to 54 tons. All coffee exported was Robusta.

In 2004/05, 373.6 tons of coffee was exported as green bean by eight different exporters in eleven shipments ranging from 1.2 to 54 tons (24.2 tons of Arabica and 349.4 tons of Robusta).

Table 11.3 Coffee exports via port of Yangon (2003/2004)

(Source: Ministry of Commerce)

Table 11.4 Coffee Exports Via Port of Yangon (2004-2005)

(Source: Myanmar Department of Statistics)

Border trade

In 2002/03, 1807.70 tons of coffee were exported by nine different companies in nine shipments ranging from 31 to 702.3 tons (200.6 tons Arabica and 1607.10 tons Robusta). In 2003/04, 473.31 tons of coffee were exported by six different exporters in six shipments ranging from 1.2 to 54 tons (349 tons Arabica and 124.31 tons Robusta).

In 2004/05, 121.92 tons of coffee was exported by eight different exporters in eight shipments ranging from 7 to 33 tons. All exported coffee was Arabica.

Table 11.5 Border trade from Myanmar to Thailand and China

(Source: Department of Border Trade)

Coffee quality potential

Trials/coffee evaluation in Myanmar

A range of coffee trials was conducted by FAO and CRIETC staff over the 2003/04 and 2004/05 seasons. Coffee was collected from many areas and processed in a number of standard ways in order to determine which processes were most suitable for large scale and small farmer processing. Controlled processing of samples ensured that clean, taint free beans were used by the tasters so that the true potential of the coffee could be evaluated. This control was important as previous samples were often poorly processed and prepared, resulting in taints and off-flavours, making it impossible to determine the potential quality. CRIETC staff and international consultants selected about 10 of the 100 available samples for assessment.

Assessment indicated that Myanmar coffee has potential in the Premium and Speciality coffee market as defined by Myanmar Speciality Coffee Association of America (see Chapter 7 for full details).

While standard parameters are used to assess coffee quality such as acidity, body, flavour and character, the actual value of coffee is ultimately up to the buyer who also has individual preferences. International trade restrictions against Myanmar also influence potential prices for Myanmar coffee.

CRIETC now has a fully equipped cupping laboratory as well as fully equipped wet and dry processing facilities that can wet process commercial coffee at 0.5 MT cherry/hr and dry process at 1 MT/hr of parchment. Extensive tasting and testing of coffee was conducted over the last two years so that CRIETC staff can now assess coffee quality to international standards.

Myanmar Government Strategic Coffee Development Plan

In 2002, the Government embarked on a plan to plant 100,000 acres of coffee. With assistance from FAO consultants, this plan has been revised with more detail, but it is still overly optimistic in projections for the area to be planted and total coffee production. Private investment has to drive the expansion and when the rate of investment slowed, investors discovered the real costs involved when world coffee prices are low. Realistic cost/benefit studies provided by the project (see Chapter 12) should assist, as will the rapid increase (doubling) in Arabica coffee prices over 2004/05.

Table 11.6 Government planting programme plan in 2005

(Source: Strategic Vision for Coffee Development in Myanmar)