Export Impact For Good

 
Countries / Territories

QA 217

  • QA 217
    Question:
    Why is Papua New Guinea Y-1 grade discounted? After all, it is tenderable at the New York basis or contract price.
    Background:
    Why is Papua New Guinea (PNG) Smallholder Y-1 grade still suffering a discount of 12 to 15 cts/lb when PNG Smallholder Y-1 grade is deliverable at basis or contract price?
    Asked by:
    Researcher - Papua New Guinea
    Answer:

    The negative differential for PNG arabica is mainly due to higher than average transport costs for this origin. However…

    Whilst PNG Y-1 grade meets the quality specifications of the New York C Contract (futures market) and is deliverable at par, the coffee often shows a certain wineyness in the cup. New York graders who taste all coffee to be certified against the C Contract often consider  pronounced wineyness as a defect and as a result many lots are rejected. Consequently few lots are actually submitted for certification against the C Contract, mostly because a rejection usually means a substantial drop in value. *

    Experienced tasters and blenders know how to use this type of coffee and at times may even search it out to achieve certain taste combinations. However, high transport costs from Papua New Guinea alone can mean large discounts, as much as 5 to 7 cts/lb plus a quality differential where applicable. Differentials constantly fluctuate of course. **

    * Winey: A fruity taste similar to fresh wine. Not necessarily unpleasant when the taste is in the background. The acceptability of 'wineyness' is a subjective judgement but certainly a light fruity wineyness is a postive taste attribute. See chapter 11 Coffee Quality for more on this.

    ** The differential between the New York C Contract price and the FOB value of a coffee reflects many aspects, including quality and of course transport costs if these are substantially higher than for comparable origins.

    Posted 16 April 2009.


    Related chapter(s):
    Related Q & A:
    Q&A 016, 017, 083, 104.