(Updates with details throughout)
NEW YORK/LONDON, Oct 28 (Reuters) - Volcafe, one of the world's biggest coffee merchants, has signed a joint-venture deal with China's Simao Arabicasm Coffee Co (SACCO) to export beans from China, among the first global traders to enter the fledgling market.
The Swiss-based coffee division of commodities house ED&F Man said on Tuesday it will set up local operations to export beans grown in Yunnan province, providing a new source of supply as drought and disease ravage crops in the world's main coffee growing regions.
The joint venture, Yunnan Volcafe Ltd, will focus on sourcing coffee beans from the Yunnan region, where Volcafe estimates the crop is "regularly in excess of" one million 60-kg bags. That is equivalent to Ecuador's annual output.
"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.
To be sure, China's crop is tiny when compared with top grower Brazil, which exports roughly 30 million 60-kg bags of beans a year. It also represents less than 1 percent of 2013/14 global coffee production of 145.2 million bags.
But the move reflects burgeoning interest in China, as its farmers expand beyond traditional centuries-old tea growing and the quality of their beans improves.
Yunnan grows mainly the hybrid Catimor variety of arabica beans, according to research from Shanghai-based consultancy Dezan Shira & Associates, and traders said that could appeal to commercial roasters who need bulk supplies for their blends.
The world's major merchants, including Noble Group Ltd and Louis Dreyfus, have operations in major growing regions such as Vietnam, Indonesia, Africa and South and Central America.
The deal comes as China's urban population is drinking more coffee. Consumption, while still low on a world basis, has quadrupled since 1999 to 44,142 tons, and is expected to grow by more than a third by 2018, according to data from market research firm Euromonitor.
SACCO focuses on shipping beans to European markets like Switzerland and Germany, its website said.
Volcafe is among the first international traders to set up local operations in China, with some major retailers established in the market.
In November 2010, Starbucks announced plans to build a farm in Yunnan to build out its share of China's nascent coffee shop market. At the time, it had 400 stores in mainland China.
That year, Yunnan's annual production was just 38,000 tons, Starbucks said.
Nestle has been active in the region for decades, training farmers and investing in infrastructure. In 2011, it announced plans to double the amount of coffee it buys from Yunnan farmers.
The maker of Nescafe has been responsible for more than a fifth of purchases from the region in recent years, it said in an April 2013 press release. (Reporting by Luc Cohen; editing by Gunna Dickson)