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India’s coffee exports set for a boost as supply issues haunt Brazil, Vietnam

Some growers, however, are sceptical because heavy rains in July and August have dampened prospects for the next crop.

August 12, 2022 / 04:53 PM IST
Tight supply concerns are likely to affect the cost of coffee

Tight supply concerns are likely to affect the cost of coffee

India’s coffee sector is poised for a good spell with forecasts of a good crop in the next harvest and strong export potential amid projections of a lower crop in Brazil, the biggest producer. The outlook for Vietnam, the second-largest producer, is also not rosy.

India appears to be better placed than other major coffee-producing countries for a good crop. The Coffee Board, a government entity that oversees the sector, projected a 15 percent increase in its post-blossom estimate to 393,400 tonnes for the 2022-23 crop, comprising 277,000 tonnes of robusta and 116,400 tonnes of arabica.

The India estimates came amid possibly lower output estimates for Brazil and Vietnam, the top two coffee producers.

Brazil’s national supply company (Conab), in its second survey, cut an earlier coffee crop forecast for 2022-23 by 2.3 million bags to 53.43 million bags. That’s still 12 percent higher than last year, although it is 15.3 percent lower than the record crop of 63.1 million bags in 2020. It cited last year’s drought and frost for the reduction, mainly in the arabica crop.

The company revised arabica production downwards by 3.1 million bags, while robusta output was raised by 760,000 bags because of better productivity and expanded acreage.

Robusta and arabica are the two main types of coffee beans. Arabica is considered the more popular coffee bean.

The United States Department of Agriculture pegged coffee production in Vietnam, comprising mostly robusta, at 30.9 million bags, down 700,000 bags from last year. It attributed the lower output to an escalation in fertiliser prices that led to their reduced use.

Higher prices

Global coffee futures have fallen to $2.12 per pound after hitting a 10-year high of $2.60 per pound early this year on supply concerns from Brazil and robust demand. The industry reckons global prices may stay at a higher level as supply issues continue to dog Brazil and Vietnam. A year ago, prices hovered at about $1.75 per pound.

However, some growers are sceptical about India’s coffee exports this time.

“Heavy rains in July and August have dampened the prospects, particularly in the south Coorg area. We can get a clear picture only in September,” said N Ramanathan, chairman of the Karnataka Planters’ Association.

Karnataka accounts for the largest share of coffee produced in the country.

Coffee exports from India increased by 16 percent to 264,191 tonnes in the period from January 1 to August 9 from a year earlier, according to data from the Coffee Board. The rise came mainly from robusta cherry, whose shipments have gone up by 30,000 tonnes. Export growth was as high as 25 percent in the earlier months as pending orders were executed.

India had record coffee exports of 394,343 tonnes in 2021, bettering the 378,909 tonnes achieved in 2017. The country exports 70 percent of its coffee output.

Europe has traditionally been the strongest market for Indian coffee, especially Italy, Germany, and Belgium.

“This year, purchases from the Middle East and North African countries also increased,” said MP Devaiah, general manager of Allanasons, an agri-based commodity and product company in Mumbai.

India had the advantage of lower freight rates to Europe than the South East Asian coffee-producing countries Vietnam and Indonesia.

Instant coffee

India’s instant coffee exports also picked up after initial hiccups following the onset of the Russia-Ukraine war. Exports to Russia, a big buyer of instant coffee from India, rebounded in the past few months. India also benefitted from lower instant coffee exports to Russia from Brazil.

“Brazil’s instant coffee exports to Russia stopped following sanctions by the US,” said N Sathappan, director of SLN Coffee.

Brazil is predominantly an arabica coffee exporter. A large share of robusta produced in the country is consumed internally and of the remainder, a major portion goes into making instant coffee for exports.

According to the latest report of Cecafé, the Brazilian Coffee Exporters Council, outbound shipments from the South American country fell 5.9 percent to 22. 4 million bags (60 kg each) during the first seven months of 2022 from a year earlier. However, export earnings rose to a record $5.23 billion, up 62.4 percent, on higher prices.

Exports of green coffee – coffee that hasn’t been roasted – reached 20.2 million bags. Shipments of arabica were little changed (+0.1 percent)  at 19.3 million bags, while robusta exports plummeted to 939,334 bags, the lowest level since 2019 and down 60 percent, it said.

Over 70 percent of instant coffee exports from India are through value addition of cheaper produce imported from South East Asian and African countries while the rest is produced from local beans. This year, growth in re-exported instant coffee was marginal while shipments of instant coffee from local beans increased sharply.

“Imports from other origins became costly because of freight rate hikes and logistics problems. Hence there was a rise in the use of local beans,” Devaiah pointed out.

The Coffee Board data showed that while re-export of instant coffee after value addition rose by 4 percent, instant coffee made from domestic beans surged by 45 percent in the period from the beginning of the year to August 9.

Sathappan said exporters are now going in for more imports as Indian coffee has become costly with robusta prices going up by 40 to 50 percent. Robusta beans are selling in the range of Rs 4,500 to Rs 4,700 per 50 kg.

The International Coffee Organisation’s latest provincial outlook for global production in the coffee year 2021-22 (October to September) remains unchanged at 167.2 million bags, a 2.1 percent decline from the previous year.

It projects world coffee consumption to grow by 3.3 percent to 170.3 million bags, exceeding production by 3.1 million bags.
PK Krishnakumar is a journalist based in Kochi.