Coffee export outlook dims as prices surge and shipping woes persist

India exports around 70 percent of its coffee production

Soaring prices and shipping problems may drag down India's coffee exports by 15 to 20 percent this year, according to the exporters.

All-time-high prices of robusta coffee and diversion of ships due to a crisis in Red Sea have hit the coffee exports badly. The exporters reckon the shipments in January and February to be down by 20 to 30 percent as not much consignments are going.

The slide is steeper in case of robusta coffee which forms bulk of the volumes shipped from the country. Around 70 percent of the coffee produced in India is exported.

The Indian robusta prices have shot up despite reports of a normal production in the country as there is a global shortage. The local robusta coffee prices are in the range of Rs 280-290 per kg, up by 50 to 60 percent in a year, tracking the international market, where the rates are at a new peak, close to $3,200 per tonne, triggered by lower supplies and high demand. Robusta supplies from Vietnam, the largest producer of the variety, and Indonesia have dropped with the shipping delays and freight increase aggravating the problem.

The price of arabica coffee, however, has remained steady as a good crop has been forecast in Brazil, the largest coffee producer. The global arabica coffee rates are around $ 1.88 per pound. In the last few years, the demand for robusta has increased with the rise in consumption of instant coffee, which mostly uses this variety.

“The buyers in Europe are looking for cheaper robusta coffee and are sourcing them from West Africa and Brazil, which are unaffected by the Red Sea crisis. In comparison the coffee from India costs 15 percent higher and takes a longer time to reach because of shipping problems,’’ said Ramesh Rajah, president of Coffee Exporters Association. European countries such as Italy, Germany, Belgium are the major buyers of Indian robusta coffee.

Besides the runaway rise in the prices, slow arrivals in the market are also making the exporters hesitant to enter into long contracts with the buyers. Despite a good harvest, the exporters say the growers are holding most of the stock “Usually the arrivals go up by February which has not happened this time. Growers seem reluctant to release the stock in expectation of further hike in the prices. Given the current situation, the coffee exports could fall by 15 to 20 percent in 2024,’’ Rajah said.

The total coffee export from India was pegged at 377,178 tonnes in 2023, down by 5.4 percent from the previous year, Coffee Board data shows.

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But the growers argue that irregular weather and labour shortage have affected the coffee harvest. While arabica harvest, which began in December, is over the robusta picking is still on. “Untimely rains in December and labour shortage have led to the widespread fall of coffee berries. The number of migrant workers coming from Tamil Nadu and northern Karnataka has dwindled by half. As a result, there could be a 20-30 percent loss in the total output,” said coffee grower MB Ganapathy.

The Coffee Board after blossom estimate for 2023-24 has predicted a 6 percent rise in coffee output to 374,200 tonnes, comprising 261,200 tonnes of robusta and 113,000 tonnes of arabica. The harvested arabica crop is around 80,000 tonnes, according to the growers. In the case of robusta though the growers reckon the crop to be closer to the board estimate but they expect a lower final output.

The growers have been getting good prices this year. “Coffee prices remained low for several years and only from last year we have been getting better prices. But the cost of production has also gone up,’’ Ganapathy, who was the former chairman of Karnataka Planters’ Association, said. Karnataka is the largest coffee producing state in India.

Coffee exporters who have been importing cheaper coffee from abroad for value addition and re-export are now looking at the option of buying from Indian market as imports from countries such as Vietnam and Indonesia have become costlier because of high prices and container shortage.

The exporters are anticipating the coffee arrivals to the market to improve after April by which time the robusta harvest will be over. Latest report of national supply company (Conab) of Brazil has predicted a 5.4 percent rise in the country’s coffee output at 58.1 million bags (each bag of 60 kg) in 2024.

But current reports about dry weather in Brazil have aided the current rise in coffee prices, according to N Sathappan, director of SLN Coffee. “If weather in Brazil improves, then coffee prices could stabilise pushing up the export shipments. This can happen if the international robusta prices come down to $2600-2700 per tonne level,’’ he said.

As per the December report of USDA Foreign Agricultural Service, the world coffee production will go up by about 4.2 percent to 171.4 million bags in 2023-24. Higher output in Brazil, Colombia and Ethiopia is expected to more than offset reduced production in Indonesia, it said.

The report points out that coffee exports from Vietnam will decrease because of a reduction in total supplies due to depletion in last year’s stock. Various reports from Vietnam also indicate a decline in production in the country.

The USDA report further adds that the global consumption at a record 169.5 million bags could tighten the year-ending inventories to a 12-year low of 26.5 million bags.