Arabica prices might see modest recovery by June

Arabica coffee prices, which saw a steep decline through the past year following a bumper crop in Brazil, are likely to rise about 10 per cent by June, owing to an off year in Brazil and low production in countries such as Costa Rica.

Arabica prices fell 40-45 per cent to 143 cents a pound, compared with 250-260 cents a pound in the first three months of 2012, before recovering to 155 cents a pound.

Arabica coffee prices have declined significantly, after recording a sharp rise. But now, they appear to have bottomed out. There is overproduction of arabica globally, and from here, there might not be any significant upward movement. We expect prices to recover to about 165-170 cents a pound by June, said Hameed Huq, managing director, Tata Coffee.

In 2012, Brazil, the largest producer of coffee in the world, harvested a record 50.8 million bags (60 kg each), including robusta coffee harvests. However, it is expected to see an off year in 2013. Analysts expect arabica to recover some lost ground this year. The arabica crop in Costa Rica has reportedly been hit by Roya fungus.

In India, the process of harvesting arabica coffee has just been concluded and planters have reported production to be lower than estimated by the Coffee Board and the Karnataka Planters Association.

A section of the exporters dont think arabica prices would rise anytime soon. They say in the January-March quarter, prices could either remain flat at 150 cents or decline marginally.

Against our earlier estimate of 90,000 tonnes of arabica crop, our members have reported lower production and the final figure would be about 80,000 tonnes this year, said Nishant Gurjer, chairman, Karnataka Planters Association.

Currently, farm gate prices are Rs 7,000-7,200 a bag (50 kg each).

For 2012-13, the Coffee Board of India has estimated arabica production at 1,04,000 tonnes and robusta output at 221,300 tonnes. The robusta harvest is underway in major growing regions and would be completed by March-end.

Ramesh Rajah, president, Coffee Exporters Association of India, said, An upward movement in the prices of arabica is unlikely in the short term, as there is no demand for the beans in consuming countries due to the continued economic recession in the Euro zone. There is reduced off-take, as consumers are looking for cheaper coffee. The bearish trend will continue for some more months, before any recovery in prices. Arabica prices were likely to remain below 160 cents a pound, he said, adding in the worst-case scenario, these could drop to 130 cents a pound.