Coffee planters to get better prices for coming crop

Indian coffee planters are likely to get 10-15 per cent more for their new crop arrival from December, on the back of a sustained price rally in the international coffee futures market.

“Coffee futures prices are expected to sustain at the present level,” said Ramesh Rajah, president of Coffee Exporters Association of India. As domestic coffee prices take a cue from international futures, planters will reap the benefit, he added.

International coffee futures prices have shot up by 35 per cent since early June on worries over production from nations like Colombia and Vietnam and speculative trading by hedge funds in the market.

The price of arabica coffee rose to $1.852 a pound for December delivery on ICE Futures in New York, a 12-year high. Robusta saw a rise of 2.6 per cent to $1,838 per tonne on the NYSE Liffe Exchange in London, a nine-year high.

However, most Indian coffee growers were not able to benefit from the rally, as around 80 per cent of the export had been completed by the start of the rally in June. “Though arabica planters had received sound margin during the January-March period, most of the robusta planters were not able to benefit much due to subdued price of the variety during this period,” Rajah said.

The recent price rally will benefit both robusta and arabica planters in the near future, he added.

Higher production estimates will also help, given the expected supply shortage from the other countries mentioned earlier.

“Exports from India depend upon availability of coffee stock and production of the crop in that particular crop year. As we expect higher output in the next crop year, export demand should remain robust, with better price for planters,” said Babu Reddy, agricultural economist with the Coffee Board of India.

The Coffee Board says the country is estimated to produce around 289,000 tonnes during this crop year, starting October, of which two-thirds is set to be exported. Most major buyers such as Nestle and Tata are pretty much in the market space, indicating sound demand, another Board official said.

During January-July this year, exports surged 53 per cent to 178,000 tonnes on the back of higher domestic production, as compared to 116,000 tonnes during the same period last year. The realisation was about Rs 1,798.85 crore, a 43 per cent rise over previous year.

Industry analysts also said higher coffee prices would not dampen export growth.

“There is a demand-supply mismatch in this commodity, fuelling price rise. So, buyers have to enter into contracts at this price level, indicating sustained demand for coffee in near future,” said Chowda Reddy, an analyst with JRG Wealth Management.

Indian robusta, which is priced at a discount to international prices, will drive export growth, he added.