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Indian green coffee exports rise amid global crunch, price hike

Typically, Indian coffee competes with that produced in Vietnam, the second biggest coffee grower, and Indonesia, which with their cheaper produce find more buyers in Europe. But now these countries are struggling because of high freight rates to Europe. In comparison, Indian freight rates to Europe are lower.

April 29, 2022 / 12:15 PM IST
Representative Image (Image source: REUTERS)

Representative Image (Image source: REUTERS)

A global supply crunch and the resultant price spike have spurred exports of Indian green coffee – unroasted coffee beans -- although the Russia-Ukraine conflict has slowed instant coffee shipments.

The benchmark New York ICE futures coffee price, based on the premium arabica variety, has eased to $2.15 per pound after hitting a10-year high of $2.60 per pound in February. Indian coffee exports, contracted when the price escalated, are being shipped now.

According to Coffee Board data, between January 1 and April 27, 2 exports rose by 25% over the same period last year to 148,402 tonnes.

“Exports are brisk in April. In the previous months also, there was good demand. But what we are shipping is for prior orders,” said Ramesh Rajah, president of the Coffee Exporters Association.

Although exports may slow down after June, when harvesting in Brazil, the world’s largest coffee producer, gets underway, Rajah said the delay in shipments could work to India’s advantage.


Brazil has its problems  

“Brazil is experiencing container shortage problems and hence its shipments are at least two months late. But the country could be exporting more this year because of a better crop and depreciation in its currency against the dollar,” he added.

In its forecast for the upcoming coffee season early this year, Brazil’s national supply company Conab estimated the 2022/23 coffee crop at 55.7 million bags of 60 kg.

This is a 16.8% increase over 2021 as the country enters the “on-year” of large production in the biennial arabica production cycle. The prediction, however, is below 2020’s record crop of 63 million bags.

The drop in production this year, when compared to 2020, is a reflection of adverse weather conditions, with drought and frost impacting Arabica crops in Minas Gerais, São Paulo, and Paraná, mostly in July and August 2021, Conab said.

Robusta vs. arabica 

India is now exporting the robusta variety, the dominant coffee crop in the country. The production of premium arabica has been much less than the 99,000 tonnes projected by the Coffee Board, according to growers. And most of it has been already exported to take advantage of the higher price. Coffee Board’s estimate for robusta production in 2021-22 is 235,000 tonnes.

“Arabica fetched a high price of Rs 16,000 per 50 kg bag this year compared with Rs 9,000-10,000 last year. Unfortunately, the growers couldn’t cash in on it much as the output was low. Robusta crop is much better, but may be 20% lower than previous year. The price level of robusta is almost similar to last year,’’ said N Ramanathan, chairman of the Karnataka Planters’ Association.

Normally, India has to compete with Vietnam, the second biggest coffee producer, and Indonesia, which with their cheaper coffee find more buyers in Europe.

But now these countries are struggling with high freight rates to Europe. In comparison, India’s freight rate to Europe is lower.

“The freight rate hikes have helped India to match the coffee prices of Vietnam and Indonesia in the global market and get more buyers,’’ said N Sathappan, director of SLN Coffee.

Instant coffee lags 

Instant coffee consignments have taken a hit after the Russia-Ukraine war began in February. India exports around 40,000 tonnes of instant coffee and Russia is a big buyer.

“Earlier, the exports used to be in dollars. But now after the sanctions imposed by the Western countries, banks are not accepting dollars. We are waiting for the proper notification to export in rupees or roubles,’’ said Sathappan.

According to a senior executive from a major coffee exporting company, one significant change after the war started is that several big instant coffee exporters who import beans for value addition and exports have now turned to the local market for sourcing as imports have been affected by a weak rupee and shipping delays.

Although this has increased demand for local coffee, many growers are still holding stock, expecting prices to go up further, the executive said.

Coffee bean imports are duty-free for re-exports, but carry a duty of 110% for use in the local market. Big exporters like CCL Ltd and Tata Coffee Ltd, two top instant coffee exporters,  import large quantities of beans for export.

Multinationals like Nestle India Ltd and Hindustan Unilever Limited use Indian coffee beans for domestic sales of brands like Nescafe and Bru.

World outlook 

According to the International Coffee Organisation’s  latest provisional outlook, consumption is expected to exceed production by 3.1 million 60 kg bags in this coffee year (October, 2021 to September 2022).

It pegged the total production at 167.2 million bags, a 2.1% decrease compared to 170.83 million bags of the previous coffee year.

The organisation as projected world coffee consumption to grow by 3.3%, to 170.3 million bags in 2021/22 compared to 164.9 million bags in the previous year. Supply and demand may be affected by variations due to a downturn in the world economy, increased cost of inputs and the conflict in Ukraine, it added.

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PK Krishnakumar is a journalist based in Kochi.
first published: Apr 29, 2022 12:15 pm
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