Coffee May Touch Rs 500 Per Kg
Coffee prices are galloping leaps and bounds, and are expected to reach unprecedented levels following an acute shortage of physical stock. The upsurge, which started in March, has remained unabated till now in the domestic market.
The price of Arabica coffee, which was ruling at Rs.70/80 a kg in January, firmed up to Rs.110 a kg. during March. This shot up to Rs. 130 a kg in April, went up again to Rs. 150/160 in the beginning of May, and touched Rs.220 a kg in the third week of May. The price is still ruling at the same high level.
It is also learnt that the prices of roasted and ground coffee have already touched Rs.250 a kg. in South India.
The price of Robusta coffee which remained steady at Rs.50/60 a kg.during January-April went up to Rs.60/70 a kg.during the first week of May. It finally touched Rs.95 a kg. during the end of May, and it has remained at that level till now.
The sudden upsurge of Rs.140/150 a kg. in coffee prices during the short span of five months is attributed to the expectation of a fall in prices by the international buyers (roasters) of coffee which resulted in the exhaustion of inventories.
Secondly, Indian coffee crop enters the market by February. Domestic planters, looking at the unusual higher prices of Rs.120 a kg.of Arabica coffee, disposed off about 80 per cent of their stock to the exporters during March and April. Now, only a small amount of stock has been left with the planters. So, the domestic market will have to rely on the small existing stock for about the next nine months till the new crop comes around in February.
According to Dr. Peter Philip, managing director, India Coffee & Tea Distg.Co.Ltd., even if the coffee prices in the international market fall, the prices in the domestic market will remain firm on account of acute shortage of ready stock.
Sources add that if the government puts restrictions on coffee exports,, the domestic price situation may change. Out of a total production of 1,95,000 tonnes, domestic consumption accounts for about 65,000 tonnes while the balance of about 1,30,000 tonnes is exported every year.
The three major coffee producing states, viz.Karnataka, Kerala and Tamil Nadu, account for 70, 20 and 10 per cent of coffee production respectively. Both the types of coffee, i.e. Arabica and Robusta, is produced in India in the ratio of 40 and 60 per cent respectively.
According to sources, the new coffee crop for 1997/98 is estimated to be around 2,50,000 tonnes as against 1,90,000/ 2,00,000 tonnes in 1996/97.
The better crop situation in the current year will not help in improving the price situation as the excess quantity of about 50,000/60,000 tonnes is quite insignificant for the international market.
According to trade circles, the Indian coffee trade has been totally disturbed on account of the levy of an additional tax burden of 3 per cent called as turnover tax imposed by the Karnataka government.
This has led to the stoppage of coffee auction conducted by private parties resulting in total disturbance in supply which has also fueled the fire in the price boom.
Trade circles demand that the Karnataka government should immediately withdraw the turnover tax to smoothen the supply situation. The coffee trade, it is said, is already burdened heavily by 6 per cent sales tax.
According to the latest international development, there is a wide spread rumour that frost is likely to occur again in Brazil, the world market leader in coffee, during 1997-98. The same disease had damaged Brazilian crop heavily in 1992-93. The frost not only destroys the coffee crop but also damages the coffee tree itself which takes about two years to recover and reach the normal crop level.
If the rumour becomes a reality, Brazilian coffee crop might come down heavily to about 14 million bags (around 8,50,000 tonnes) from the usual crop level of around 26 million bags (about 15,00,000 tonnes). And if that happens, it will not be surprising if the coffee prices touch an all-time high level of Rs.500 a kg. during the new season.