As demand swells, Robusta beans prices rise to $2,200 per tonne

Economic slowdown forces customers to switch from Arabica to less expensive coffee

The price of Robusta, a major variety of coffee grown in the country, has increased by a little more than 57 per cent year-on-year to $2,200 a tonne, after a spell of price drops and bad weather.

Growers said that this will help them to break even, but production has dropped 20 per cent.

Ramesh Rajah, president of the Coffee Exporters Association, said the price had touched $2,200 a tonne from $1,400 a year ago. 

The current price is the highest in the past 52 weeks.

The price increase was mainly because of the demand exceeding the supply. Traditionally the demand for Arabica varieties, which are costlier than Robusta, is high.  But, as many developed and developing economies are going through a slowdown, people have become cost-conscious and are preferring inexpensive varieties of coffee, which is pushing the demand for Robusta, according to Rajah.

According to the International Coffee Organisation (ICO), global coffee production in 2016-17 is expected to remain relatively stable, up 0.1 per cent to 151.6 million bags (internationally one bag is 60 kg and in the domestic market it is 50 kg).  As a result, world consumption for 2015-16 has been revised to 155.7 million bags, up 2.6 per cent over the 2014-15 figure. This is a significant deficit compared to the production of 151.4 million bags in 2015-16.

The production of Arabica is up by 4.4 per cent to 93.5 million bags in 2015-16 (3.9 million bags more than last year), while Robusta’s production is expected to fall by six per cent or 3.7 million bags to 58.2 million bags, lower mainly due to the drop in production at Brazil and Vietnam, where buyers will now look at importing more from India since production in the two countries is down. The low production is making export difficult because exporters are not able to expand beyond their traditional markets. 

Italy is the largest buyer, accounting for close to a fourth of Indian coffee shipments, followed by Germany, Russia and Belgium.

Coffee export in 2016 touched a new high of 360,000 tonnes, an increase of around 17 per cent. But the realisation, in dollar terms, was down around three per cent due to the rupee fluctuating against the dollar.

In 2016, Arabica shipments grew around 18 per cent to 51,648 tonnes (43,785 tonnes in 2015), while robusta exports were up around 20 per cent at 201,000 tonnes (167,000 tonnes in 2015).