The Hindu Business Line : Exporters stop booking arabica contracts

Sluggish exports
25-30 pc shortfall in arabica output estimated.
Carry forward stocks lowest in recent years.
Stiff competition from Vietnam in Italy.

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Bangalore Feb 15 An estimated 25-30 per cent shortfall arabica output in the current coffee year, coupled with low carry forward stocks at beginning of 2007, has forced growers to hold back their produce in anticipation of better prices.

As a result, exporters have stopped booking arabica contracts in the past few weeks, said Mr Ramesh Rajah, President of the Coffee Exporters Association.

Overall impact

This could impact the overall coffee exports for 2007, which will be lower by 10-15 per cent over the previous year's 2.42 lakh tonnes, he added.

But tracking improved prices, the unit value of export shipment has increased to Rs 90,766 a tonne (Rs 81,177).

Interestingly, the carry forward stocks with growers and exporters were estimated at 10,000 tonnes, the lowest in the recent times, Mr Rajah said. Normally, inventory at the beginning of calendar year used to be around 30,000 tonnes.

Lower output

Mr Rajah said coffee output in the 2006-07 crop year could be lower than the Coffee Board's post-monsoon estimates of 2.88 lakh tonnes, of which arabica crop size is likely to be 99,700 tonnes.

Trade estimates indicate that coffee output could be hardly 2.7 lakh tonnes this year.

Arabica harvest, which is almost complete, could be lower by 25-30 per cent than the earlier estimates, Mr Rajah said.

"The crop was not as much as what it came to the market last year."

Erratic rains during harvest time, coupled with a combination of factors such as the incidence of stem borer and the non-availability of adequate labour during harvesting, have impacted the output, Mr Rajah said.

Competition

The harvest of robustas is currently on and should be over by March-end.

Further, Indian coffee continues to face stiff competition from Vietnam in its key market, Italy.

Indian exports to Italy have been growing 15 per cent year-on-year and stood at 53,393 tonnes in 2005-06, accounting for 27 per cent of total exports.

Following a good harvest, Vietnam is aggressively pushing its coffee exports to Italy, which might pose difficulties to Indian exporters in sustaining growth momentum in that country.

Also, the Indian coffee could face the risk of price parity. The premium that Indian robustas commanded in Italy could erode, from $450 a tonne earlier to $200, Mr Rajah said.

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