A plunge in global coffee prices in the last few weeks is not expected to have an impact on Indian coffee exports because a majority of the beverage stock has already been shipped to buyers.
Most of the shipments have gone at higher prices that prevailed during the year and exporters are now waiting for fresh arrivals from the ongoing coffee harvest in the country to enter into new export contracts.
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The shipments are up by 9% from January 1 to November 4 at 353,226 tonnes in 2022 from a year ago. Last year saw record export of 394,393 tonnes.
Different weather conditions have led to a change in the forecast of the coffee harvest in Brazil and Vietnam, two largest coffee producing countries.
Brazil lowers coffee output forecast
Brazil’s food supply agency Conab had lowered its forecast for the coffee output for 2021-22 (from October to September) of the country to 50.38 million bags (each bag of 60 kg) in September, down from 53.43 million bags in its May estimate because of scanty rainfall and the effect of severe frost from last year.
But frequent rains and good sunshine in the subsequent weeks have led to the prediction of good prospects for the next crop, which have pulled down the futures prices.
Benchmark ICE futures prices have dropped by 15 to 20% to $1.75 per pound now. Two months ago, the prices were hovering around $2.12 per pound.
“Indian exporters, who had entered into export contract when the prices were high, have shipped most of their stock. They will enter into new contracts after the harvest in India is over early next year.
Also, Indian coffee prices have not fallen to the extent of global prices,” said N Sathappan, director of SLN Coffee, adding that even the current level of global prices is not bad for exports.
Higher Vietnamese exports dent robusta prices
Higher export from Vietnam, the second biggest coffee producer and the largest robusta coffee grower, have pushed down robusta bean prices in the global market.
Vietnam’s export of 1.73 million tonnes of coffee in 2021-22 is said to be a four-year high.
Robusta futures have declined by over 16% to $1,869 per tonne in the space of two months.
This has come at a time when the high prices of inorganic fertilisers that led to increased use of organic manure for the coffee crop in Vietnam have triggered concerns of a lower crop in 2022-23.
“But sufficient rains and good prices may prompt the growers to go for a better crop in Vietnam,’’ Sathappan said.
Output and consumption
The United States Department of Agriculture report on the world coffee output has said global production will rebound by 7.8 million bags to 175 million bags in 2022-23. It pegged consumption at 167 million bags.
India’s coffee harvest has started and is expected to go into full swing in the next two months. The Coffee Board has projected a 15% higher crop for 2022-23 at 393,400 tonnes, comprising 277,000 tonnes of robusta and 116,400 tonnes of arabica.
But given the intensive rainfall in the main coffee growing areas in Karnataka, the largest coffee producer in the country, growers are not hopeful of reaching that figure.
``The robusta crop may get close to the projected figure but the arabica crop will be much less than the forecast. At this stage the output could be 20 to 35% less. But we will get a clear picture only by January,’’ said N Ramanathan, chairman of the Karnataka Planters’ Association.
Increased pest attacks
According to him, many of the planters have converted from arabica to robusta in the past decade because of increased attack of white stem borer pest. The sturdier robusta is more resistant to pests.
Planters were using temporary methods like wrapping the infested plant with polythene materials to prevent the spread of the pest.
“Though robusta prices are lower than arabica, the former requires less expense for maintenance,’’ Ramanathan said.
Indian coffee exporters are expecting a good crop though it could be short of the Coffee Board target.
“The year 2022 has been good for coffee exports and we have gone past the pre-COVID levels. We expect 2023 to be on par with the current year with reasonable prices. The carryover stock is low and the exports can resume only after fresh stocks arrive,’’ said Ramesh Rajah, president of the Coffee Exporters Association.