Coffee Prices Likely To Take Off

An 'abnormal' increase in coffee prices in the country is likely after global coffee prices hit a new high on Wednesday as the producing countries gave indications of tight supply, industry sources said.

Rising international prices and lower domestic crop production estimates have already pushed up the prices by 20 per cent since February 24. 'The prices in the international market have been shooting up everyday that we are in a dilemma. We have no other option but to increase coffee prices steeply, though we are not sure how much to increase,' they said. Until a few weeks ago only the arabica variety had been subjected to the price rise in the global market. But now the prices of robusta variety have also started rising. Global coffee prices touched off an all-time high yesterday with the arabica variety contracting at $2.48 dollars a pound. The price of this variety, the one consumed most in India, have gone up by nearly 150 per cent since the start of the year. The steep hike was due to producing nations like Brazil, Columbia and Ivory coast finding problems and stocks being low with traders.

 

India, too, has been hit with the same problem as production this crop year (July 1996-June 1997) has been estimated to be a low 2.05 lakh tonnes by the coffee board and a practically nil carryover stock. The domestic crop production has, however, been put at 1.94 lakh tonnes by the US department of agriculture and 1.8 lakh tonnes by the trade.

In view of the shortage in the major coffee producing countries, there was a tremendous pressure on export from India, according to the All India Coffee Merchants Association president. ''The government has also not helped the situation by remaining a silent spectator,'' he said. However, industry sources said there were good export enquiries, though they were not sure how much of the anticipated 85,000 tonnes of Arabica variety, expected to be produced this crop year, had been contracted. (The robusta makes up the rest of projected coffee production).

The prospect of a disappointing production in Brazil, the crop in Columbia being hit by a plague and reports of lower production in Ivory coast and Mexico have been the major reasons for the steep increase.

The Columbia National Coffee Growers Federation has also said that it would find it hard to meet the export commitments. The industry, however, expects the situation to improve after this month.

Sources fear that if the hike in retail coffee prices continue, there could be a dip in consumption with consumers likely to opt for other beverages. Referring to the coffee board's move to introduce a arabica-robusta mix for consumers, industry sources said.

It was unlikely to satisfy the consumers or win them back. The sources also felt that the centre's indifference to the price hike could have stemmed from the fact that two-thirds of the commodity was being exported. 'Probably, they would like to export more than look after the consumers' interest,' they said.

Plantation sources, however, contend that the price hike was only a temporary phenomenon. 'The price rise in coffee is not being witnessed too often', they said, adding that coffee prices had not witnessed the hike as seen in other essential commodities.

They also pointed out that the prices had gone up only this year, after touching a high of Rs 220 a kg in 1994-95 following the crop in Brazil being affected by frost and drought.

Coffee prices were raised from Rs 150 a kg to Rs 160 a kg on February 24, then to Rs 170 a kg on March 10 and to Rs 180 a kg on April 22.