The Hindu Business Line : Lower output, higher prices hit coffee exports

COFFEE exports have shown a sharp decline during the first six months of the calendar year but it is expected to look up and recover to some extent by September.

"Things had slowed down a bit earlier. Now, they are looking up," said Mr G.V. Krishna Rau, Chairman, Coffee Board. "In addition, production has dropped."

"There was virtually no sale of coffee from around February 15 to April 15 as growers sought higher prices and exporters were unable to offer it. As a result, exporters had to cancel their contracts," said Mr Milan Shah, a Bangalore-based exporter. According to Coffee Board statistics, from January 1 to June 2, exporters had obtained permits to export 98,000 tonnes. During the same period last year, 1.3 lakh tonnes of permits had been issued. At the same time, the Board has received confirmed shipments for 67,000 tonnes this year, against 1.21 lakh tonnes a year ago.

"Growers were misled into thinking that coffee prices could tend to scale higher and that resulted in them demanding higher prices. That also forced exporters to cancel contracts," said Mr Arun Bidappa of Karnataka Coffee Brokers Pvt Ltd.

As exporters cancelled their contracts, the Coffee Board began getting complaints from overseas buyers. "We got a few messages from some of the overseas buyers on cancellation of contracts. Therefore, we sent an advisory to the exporters to exercise caution," Mr Rau said.

According to Mr A.K. Bhandari, President, United Planters' Association of Southern India, fall in exports is due to a combination of factors. "One was certainly as growers anticipated higher prices. The other was due to lower production," he said.

"There is substantial drop in production this year," said Mr Rau.

The production for the October 2004-September 2005 period is now estimated to be around 2.5 lakh tonnes against revised projections of around 2.75 lakh tonnes. Before the beginning of the season last year, projections put the production at nearly three lakh tonnes. This is against 2.92 lakh tonnes during 2003-04 season.

"There has been a 15-20 per cent drop in robusta production," Mr Bhandari said. Initially, robusta output was seen around 1.75 lakh tonnes. Now, it could be lower than even 1.5 lakh tonnes, according to the industry.

Besides dry weather, the white stem borer has caused damage to the coffee plants. "This year also, there is a possibility of the borer causing damage to the crop," grower sources said.

"In view of the lower production, exports may not climb to higher levels," said Mr Bhandari.

"During the last few weeks, arrivals have picked up though the sales have not increased at the Indian Coffee Traders Association auctions. Difference in prices in the global market and domestic market is the reason for the low sale," Mr Rau said.

"There is plenty of coffee available. Growers have begun to offer as the monsoon has arrived," Mr Bidappa said.

Currently, arabica parchment is being offered at Rs 4,500-600 for a 50-kg bag at the farmgates, while robusta cherry is ruling at Rs 1,400-1,450 for a bag. This is against around Rs 5,000 a bag for the parchment and Rs 1,600 for the cherry during February-May.

"Maybe, now exports seem to lower by 25 per cent. But it will recover by late August. However, exports could be lower 5-10 per cent than last year," Mr Shah said.

Coffee exports during 2004 calendar year declined six per cent to 2.096 lakh tonnes.

"Two months ago, we were asking our buyers not to trouble us for coffee. But now we have begun to discuss business, though onward sale is not happening. We have enough coffee in our warehouses. Also, it is summer in European countries and therefore, we are passing through the usual quiet period for the trade. We should be able to make up for the loss by September," Mr Shah said.

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Lower output, higher prices hit coffee exports