Coffee prices peak on tight global supply concerns

Coffee prices are on the boil, tracking global supply concerns. On Thursday, prices of arabica plantation variety reached a record high of Rs 245 a kg at an auction centre in Vijayawada, climbing further from the all-time high reached on Monday, traders and analysts said.

On Monday also, the prices had breached the record levels trading at Rs 240 at the same auction centre in Karnataka. And, the coffee prices may rise further as global futures are hovering at record levels.

Supply concerns from Columbia and Central America that are reeling under torrential rains loom large over the global markets. On Wednesday, arabica beans futures for March delivery on ICE US closed at 13-and-half-year high of $2.3965 a pound.

“Coffee damage in Columbia has taken domestic prices to an all-time record and traders here are keenly looking at the volume of damage due to adverse weather conditions there," said P Sureshbabu, proprietor of Bangalore-based Chaithanyaa Coffee, adding, “Meanwhile, prices will continue to rise.”

Supply of fresh coffee crop in India has also got delayed due to untimely rain during November and early December. Growers believe fresh coffee will hit the markets only by mid-January, even as picking of arabica crop has begun slowly in parts of key growing states, mainly Karnataka.

Also, fuelling the rise in coffee prices is feeling among growers that they should get more on their produce as exporters are pocketing huge profit margins due to steep price rise in global markets.

“At the current levels of international prices, growers here should get 10-15 per cent more on their crop,” said Anil Bhandari, a coffee grower and member of state-run Coffee Board.

Traders, however, accuse growers of holding back coffee stock expecting prices to rise further.

Amidst supply concerns from top arabica coffee growing countries, India, too, reduced its output forecast from the previous estimates. The state-run Coffee Board cut production estimates to 299,000 tonnes, from earlier 308,000 tonnes.

Still, the latest estimate is higher than 289,600 tonnes a year ago.