Indian coffee exports set to hit 10-year low

Bumper crop next year likely to trigger prices down.

Reduced global demand due to economic meltdown and low coffee output back home have had their combined effect on Indian coffee exports. For the coffee year ending September 2009, exports are set to register a 10-year low. According to industry estimates, the current coffee year would conclude with exports in the range of 180,000 - 190,000 tonnes, which would be 14 - 18 per cent lower compared with the previous coffee year (Oct 2007 - Sept 2008).

For Oct 2008 - June 2009 period, exports stood at 136,163 tonnes, whereas in the corresponding period of the previous year 169,966 tonnes were shipped out of India.

“Exports are still reeling under impact of global recession. The coming 2-3 months are more or less flat for India and by September we will end up exporting in the range of 180,000 - 190,000 tonnes. With this, coffee exports will be at 10-year low,” said Ramesh Raja, president, Coffee Exporters Association of India.

India exports about 75 per cent of its produce. While offtake from the European markets and the Russian Federation came down considerably this year owing to economic slowdown, India’s domestic output also painted a dismal picture. There was heavy crop loss in the biggest-producing state of Karnataka due to untimely and excessive rains and berry-borer menace. Hence the Coffee Board had to trim its output forecast. It is estimated that by September 2009, total output in the country will stand at 262,300 tonnes, which is 10 per cent lower than the initial (post-blossom) estimates of 293,000 tonnes.

However, the Coffee Board sees much hope in the next coffee year beginning this October, and has pegged output at 306,300 tonnes - arabica 101,525 tonnes and robusta 204,755 tonnes. There are no excessive rains so far and it is expected that harvesting will be duly completed resulting in higher output. Timely advisories have been issued to growers to tackle berry borer problem, said a senior official at the Coffee Board. For season 2008-09, final projection for output in Karnataka was pared down to 183,000 tonnes from the earlier projection of 197,000 tonnes. However, for the new season, the board puts Karnataka’s output 20 per cent higher at 221,475 tonnes.

Even Brazil, the biggest coffee growing country in the world will see bumper crop in the next year, as per industry estimates. High output in major coffee producing countries would mean a glut in the market, resulting in a sharp fall in international markets. “In India prices may not fall much as there will be a sustained domestic demand. However, exports will see sharp reduction in price realisation. So, the next year will be characterised by high volumes and low prices,” Raja noted.

Expectations for high output for the next coffee year have already led to selling by speculators resulting in price fall in last two weeks. According to industry reports the price of the coffee contract for July delivery fell to $1.167 a pound, which was 18 per cent down compared to the previous month.