Brazilian brew dilutes coffee value
Uncertainty looms large over India’s coffee exports in the wake of falling coffee prices globally following the forecast suggesting bumper crop in Brazil and Vietnam, the two major coffee producers and exporters of the world. With coffee harvest of Brazil to be better-than-expected in the coming season, the prices in the international market are likely to move further downwards. This comes as a bad news for the Indian exporters since a high production from the two coffee majors will leave them with limited demand overseas. According to the industry players, the unexpected high production from Brazil has upset the calculations. “Brazil traditionally has harvested its coffee on a two-year cycle, between ‘on’ and ‘off’ years. Since last season was an ‘on’ year, the coming coffee season was believed to yield lesser harvest in 2015-16. The long dry weather had further strengthened the belief. However, good rains increased the prospects of a better crop than expected. The phenomena has led to fall in prices globally,” said an official from the Coffee Exporters Association on the condition of anonymity. And the exporters are not alone since the falling prices will also hit the coffee growers, who have been holding on to stocks hoping for the prices to recover. “In view of falling prices, the coffee growers will also be at the receiving end. Some of the growers are holding back the stock hoping that the prices will improve. However, the fall in prices further will make them hold their harvested crop – leaving them with the surplus. The sustaining of the crop will affect them since the cost of cultivation has been on the rise,” said Karnataka Planters Association. The global sentiment is reflecting in the Indian coffee prices at home since the international prices play a significant role in driving the domestic prices. It is noteworthy mentioning the recent global trend has added to the worries of the exporters, who were already concerned about the declining export volumes following the sluggish demand in European markets. More so, Usually, India’s exports are virtually equivalent (an estimated 90%) of the coffee yield. India exports both Arabica and Robusta coffee varieties to major destinations including Italy, Germany, Russian Federation and Turkey. However, the exports have been affected with European buyers going slow on purchases. “Globally the prices have fallen. The buying has been slow from the European market, which is a major exporting destination. The trend is weak and a further fall in the prices will hit the exports,” said M P Devaiah, general manager of Allanasons, one of the major coffee exporters. The coffee exports have already witnessed a drop in terms of value realization. According to the Commerce Ministry day, India’s export value of coffee in April this year stood at $77.5 million, about 25% lower than that recorded a month ago. It was down by 6.39% against the $82.8 million exports registered during the same month in 2014. Adding to the worries of the exporters, a US Department of Agriculture (USDA) report had recently predicted India's coffee exports to decline 5.6 per cent to 4.7 million bags, in the ongoing marketing year ending in September. The slow exports from India can also be attributed to the coffee growers who have been holding on the harvested crop anticipating better prices. Furthermore, the estimated higher production would leave the exporters with more exportable surplus.
June 01, 2015 | 6:50 pm IST.
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