Coffee exports to fall 10% on lower arabica output

India's annual exports of coffee are set to drop by a tenth in the marketing year ending September 30, hit by lower output of the arabica variety as farmers' demand for higher prices erodes foreign competitiveness.

Lower shipments by India, the world's sixth-biggest coffee producer, could further stiffen global prices of arabica, which jumped 50 per cent in 2014. Italy, Germany and Belgium are India's main coffee buyers.

"Exports will drop at least 10 per cent," Ramesh Rajah, president of the Coffee Exporters' Association of India, told Reuters. "Indian coffee is too expensive compared to other destinations."

Attacks by the stem borer pest and dry weather have hit arabica output, prompting Indian planters to demand a hefty premium for both arabica and robusta grades over New York and London futures.

India, which exports three-quarters of coffee production, shipped 303,290 tonnes in the 2013/14 marketing year. But since the start of the latest season on October 1, exports have fallen 13 per cent to 75,179 tonnes.

Production of arabica, which makes up a third of India's total coffee output, could fall 12 per cent to 90,000 tonnes this season, Rajah said. Arabica harvesting has nearly been completed but farmers are not willing to sell, holding out for prices to rise.

"The price has been fluctuating a lot abroad, expecting a drought in Brazil," said Anil Kumar Bhandari, a planter and a member of the state-run Coffee Board. "Indian farmers are waiting for prices to climb up again so they can commit sales." Adverse weather in top producer Brazil could widen a global coffee supply deficit in 2014/15 and prop up prices, a Reuters poll of 13 traders and analysts showed.

Arabica coffee is typically roasted and ground for brewing and can vary widely in quality, with some reaching top levels.

Robusta, however, is more bitter, and either processed into instant coffee or added to a roasted blend to reduce the cost.

"A significant amount of arabica is still unsold," Bhandari said. "If prices stabilise, arabica exports can pick up from March-April onwards. Robusta supply will also start around that time."