The Hindu Business Line : Coffee exporters shy away from booking orders

A SHRUNKEN crop size and an anticipated further hardening of the rupee against the dollar has prompted coffee exporters to shy away from booking forward orders for the current calendar year.

This has resulted in an estimated 20 per cent decline in order books, according to Mr Ramesh P. Rajah, President, Coffee Exporters Association.

Mr Rajah estimates that coffee exports for the current calendar could be down by at least 10 per cent over last year. Coffee exports for calendar 2003 increased by about 3.3 per cent in quantum to 2.20 lakh tonnes over previous year.

Coffee exports, Mr Rajah said, have started looking uncompetitive on the back of an appreciating rupee and rising freight costs. Freight costs have gone up by more than 10 per cent over the last few months. "Exporters are unwilling to take commitment for forward shipments as the forward premiums on the rupee are at a low and the cost of carrying is high," he said. Moreover, the international roasters are not willing to pay any premium, which they used to do earlier, said Mr Rajah adding, "majority of the order bookings are for spot shipments."

Sourcing of coffee normally takes place during the peak of harvest season that is between January and April, while the shipments are spread over the rest of the year, Mr Rajah said. Normally about two third of the shipments are done before June and the rest during the post-monsoon period.

Mr M.S. Nagesh of SunShine Traders in Chikmagalur, who supplies coffee in bulk to leading exporters, said the current crop is much lesser than earlier estimates. Several pockets in coffee growing heartland of Chikmagalur, which have been severely impacted by the drought, have reported a decline of as much as 50-60 per cent, he said. This has forced the exporters to go slow on booking orders and not many of them are taking contracts for orders beyond September, he added

However, the Coffee Board Chairperson, Ms Lakshmi Venkatachalam, said that exports look promising for the current year. The board has issued permits to export 41,988 tonnes from January 1 to February 27, a 19 per cent increase over the permits for 35,244 tonnes issued during the corresponding period last year. Confirmed shipments for the said period stood at 15,942 tonnes, a decline of 39 per cent over 29,161 tonnes exported during the same period.

"The market fundamentals are better and we should see an improvement in exports," Ms Venkatachalam said. Moreover, the peak export season (April to June) is yet to start, she said. Admitting that output has been impacted in several pockets, Ms Venkatachalam said that the board in its post-monsoon estimates had pegged the current crop-size at 2.705 lakh tonnes, about 1.7 per cent lower than earlier estimates.

Meanwhile, Mr Ramesh said the Government is yet to announce the transport subsidy for the current year. The Government has been giving a transport subsidy of 50 paise per kg for exporters, which had helped them to offset the losses caused by dollar depreciation, he said.

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