Coffee planters upbeat on firming of export price

With the Brazilian harvest over, exporters are betting on winter consumption in the 3rd quarter

Coffee planters are upbeat about export prices firming in the third quarter (October-December) on surging demand for the beans, especially in traditional and emerging markets.

“The downward trend in Arabica price is over and there would be an upswing in the coming months as the peak consumption season begins in North America and Europe,” planters said.

Arabica prices declined 42 per cent to $1.75 per pound (lb) from a high of $3 in March-April of 2011 on the back of bumper crop and release of stock pile in Brazil. Slackening of exports to the European Union countries too added to the price fall.

As the Brazilian harvest is almost over, exporters believe the prices will firm in the next quarter. However, fall in Robusta price was modest during this year and it is presently traded at $2,150 per tonne.

Brazil harvested a bumper crop of 50.6 million bags as it entered the ‘on-year’ (good season) of the biennial cycle. However, the International Coffee Organisation (ICO) is yet to come out with an official estimate for the 2012 season.

“The bumper crop in Brazil has been factored in this price drop. With the next crop year being an ‘off-year’ (bad season) in Brazil and the peak consumption season coming up in Europe and North America (December to April), we expect the prices to firm up by the end of this year,” Marvin Rodrigues, chairman, Karnataka Planters’ Association (KPA) told Business Standard on the margins of 119th annual conference of planters here.

Coffee exporters expect the prices to recover further and hover around $2 per lb in the coming days, if not more. “With the peak winter consumption coming up in importing countries, we expect prices to firm up. However, it is too premature to say what would be the price levels by December. As overall global consumption is going up, we expect the prices to be better ahead,” said Vijayan Rajes of Tamil Nadu-based MSP Plantations.

Given the robust consumption growth across countries, the price decline appears to do more with market sentiments. Demand surge is likely to continue in emerging economies in addition to the growth in niche markets, the planters said.

During 2011-12, exports were up 9.1 per cent to 345,423 tonnes against 316,504 tonnes in the previous year. In value terms, the exporters earned Rs 4,851.52 crore, up 31.8 per cent over the previous year, and the unit value went up 20.8 per cent to Rs 140.45 per kg.

However, it would be a huge challenge for Indian coffee exporters to repeat the past performance as there are no signs of let up in the debt crisis in the Euro zone, which is India’s principal export market.

Exporters feel the incentive scheme of Rs 1 per kg for high value coffee exports to countries like the US, Canada, Japan, Australia and New Zealand should ward off the decline in exports to Europe to some extent.