India's 2016-17 coffee output may drop by 12%: USDA

India's coffee output is expected to drop by 12.06 per cent to 5.1 million bags in the ongoing 2016-17 marketing year that started from October, on fall in crop yields because of dry spell in key growing states like Karnataka and Tamil Nadu, a latest USDA report said.
Higher global prices for both Arabica and Robusta varieties, coupled with a smaller Indian crop, are pushing domestic prices to their highest levels this year, it said.
Although rise in global prices will increase opportunities for Indian coffee bean exporters, it will decrease domestic demand from last year. Carryover stocks are expected to be at similar levels as last year keeping the prices in check, it added. One bag is of 60 kg.

According to the US Department of Agriculture (USDA), Indian coffee crop in 2016-17 marketing year is estimated at 5.1 million bags as against 5.8 million bags in the previous marketing year that runs from October to September.
The production of Arabica variety coffee is pegged at 1.4 million bags and Robusta at 3.7 million bags for this year, it said.
USDA's projections are however lower than the government body Coffee Board's forecast of 5.3 million bags for 2016-17.

Lower coffee production is expected, the USDA said because coffee yields in Karnataka, Tamil Nadu and Kerala are likely to be lower due to dry spell.

While Karnataka's coffee production areas experienced normal levels of rainfall during early 2016, this region also experienced an extended period of hot and dry weather prior to and during the southwest monsoon season (June-September), resulting in lower yields.
Although many Robusta growers were able to irrigate their bushes on a one-time basis, they were generally unable to consistently irrigate due to limited water availability, the report said.
On prices, the USDA said Indian prices have tracked with global prices for both varietals, which have also surged since January with reports of expected lower production in other major coffee producing countries.

Spot prices of in Karnataka for Arabica have risen by 18 per cent, while Robusta prices have risen by 31 per cent since January 2016, it added.
On India's consumption, the USDA said it would be 1.1 million bags, which is a reduction of 1,00,000 bags from last year. A large percentage of the crop continues to be exported with limited availability for consumption.
It also said that Indian coffee continues to remain competitive in global markets and demand remains strong in the traditional markets of Italy, Germany, and Belgium.