The Hindu Business Line : High premium for washed robustas draws buyers’ ire

In a tight spot
Indian washed robusta sellers seeking a premium of nearly $800.
Planters say it is difficult to match the quality of the Indian robusta.
Shipments down by over 50% at 226 tonnes in January.

M.R. Subramani

Chennai, Feb. 4 Five years ago, using robusta coffee in the Italian Xpresso coffee was unthinkable. Today, Indian washed robustas are being used instead of arabicas in Xpresso coffee. As a result, they began to command a premium in the global market up to nearly $500 a tonne.

With robusta prices in London ruling at over $2,100 a tonne, sellers of Indian washed robustas are demanding a premium of $800. Things, however, have run into rough weather with buyers resisting the high premium and even threatening to replace the washed robustas with arabicas from South America.

“Buyers are threatening to stop procuring our washed robustas since they think we are seeking a higher premium. It has to an extent affected exports in January of the grade, also known as robusta parchment,” said Mr Ramesh Rajah, President of the Coffee Exporters Association.

Though provisional coffee exports figure shows a rise in January shipments to 14,172 tonnes from 14,122 tonnes a year ago, robusta parchment sales abroad are down more than 50 per cent at 226 tonnes against 561 tonnes.

Artificial boost

According to the Coffee Board, robusta parchment AB enjoys a premium of $530 over robusta coffee traded in London.

Coffee industry sources said the premium had been artificially raised, though supply of the grade was tight in the global market, mainly from India and Vietnam.

“Buyers are not ready to give such a high premium for the washed robustas. But the problem is they can’t change the blend of the coffee with our produce overnight from 100 to zero. It will happen slowly and they will keep reducing,” Mr Rajah said.

Exuding confidence

According to plantation sources, it will be difficult to replace washed robustas in Xpresso. “Roasters and buyers will have to accept that high or low prices are part of our business. No one can match our quality in the robusta sector,” they said.

“It is wishful thinking on the part of some roasters that they can replace our washed robustas with mild arabicas from South America, especially Colombia,” the sources said.

The confidence of the plantation sources stems from the fact that coffee exports to Italy, seen as market for quality coffee, have increased significantly in the recent years and Indian coffees have penetrated deeply in that market mainly on marketing efforts.

Note of caution

According to the Coffee Board, exports to Italy have increased from 41,842 tonnes during 2001-02 to 62,807 tonnes (provisional) during 2006-07. In terms of the share of total coffee exports from the country, it has increased from 19.59 per cent to 26.50 per cent in 2005-06 before slipping a tad to 25.32 per cent last fiscal.

But a section of the industry feels, the buyers’ threat could be for real. “Today, washed arabicas are being blended in Trieste, Italy and Hamburg, Germany. Technology is available in these places to replace our washed robustas with other grades of coffee. It is possible with technology to match the Indian flavour,” they caution.

Initially, Indian robustas had commanded very high premium but it had declined gradually with Vietnam making rapid strides in robusta production. The South-East nation now tops in global robusta production.

Currently, farm-gate prices of robusta parchment are about Rs 500 a bag (of 50 kg) lower than arabica parchment at Rs 4,150-4,200. In London, on Monday, robusta was quoted at $2,146 with fund buying propping up the beverage to its highest since November.

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