Global woes take a toll on arabica coffee

Exports decline 5% anticipation of bumper crop in Brazil drags down price by 26%

Unlike robusta coffee prices, which have recently seen a 25 per cent increase, prices of arabica coffee have crashed 26 per cent, since January. Its price is currently at Rs 8,200 per bag (each bag is equal to 50 kg), against Rs 11,000 a bag in January.

The decline in prices of arabica has been attributed to relatively low demand in the international markets, a record bumper crop in Brazil and the euro zone crisis. The Brazilian crop size is estimated at 50.5 million bags.

ICE arabica coffee futures dropped to new lows, as the macroeconomic situation in Europe and a stronger dollar continued to weigh on the market. ICE Arabica for July delivery settled 0.6 per cent lower at $1.6440/lb, the Coffee Board of India said on its website.

India’s arabica exports during the first five months of the year have declined five per cent to 35,237 tonnes. While arabica parchment exports have fallen nine per cent to 26,843 tonnes, exports of arabica cherry have increased 14 per cent to 8,394 tonnes.

“The demand sentiment is slightly lower in the international coffee market in anticipation of a record bumper crop in Brazil, which has started shipping its coffee for the year. As a result, prices have crashed in the past few months. The prices in India are a reflection of the global trend. Lower prices also mean less investible funds with growers for the next crop year,” Marvin Rodrigues, chairman of the Karnataka Planters Association (KPA), said.

However, 2012-13 is an off-year for Indian coffee and early estimates made by KPA peg arabica production at about 10 per cent less than in the past year.

This is primarily on account of 40 per cent less rainfall during the pre-blossom and blossom periods. In major growing regions in Karnataka, which account for over 70 per cent of the country’s coffee production, rainfall was below average during the March to April period, he said.

“Since this is an off-year for coffee in India, we cannot expect a good crop. The plants cannot produce the same yield for consecutive years. Moreover, due to less than normal blossom showers, there will be an adverse impact on the output of arabica variety,” Rodrigues added.

For the year 2011-12, coffee production is estimated at about 295,000 tonnes, about 2.3 per cent less than in the previous year. Arabica production is pegged at about 95,000 tonnes, about 9.5 per cent less than in the previous year. “We expect arabica production to be lower by 10 per cent on expectation for 2012-13. Our official estimates for the year will be announced by the middle of June,” he added.