The Hindu Business Line : Respite for coffee growers as global prices recover

A BOUNCEBACK in coffee prices in the global market has provided some respite to domestic growers, worried over fall in the farmgate rates since the middle of last week.

The prices are expected to firm up in the short term, especially with projections that the crop in Brazil next season starting June would be around 42 million bags of 60-kg.

"Arabica parchment prices have improved to Rs 3,450-3,500 for 50-kg bag at farmgate level, while robusta cherry is ruling at Rs 1,350-1,375 a bag," Mr Bose Mandanna, former Vice-President, Coffee Board, and a planter, told Business Line.

Last week, arabica parchment prices had slid to Rs 3,350 from Rs 3,750 witnessed at the beginning of the month as futures on New York slid by nearly 10 cents a pound.

Coffee prices have recovered this week on buying by speculators but experts feel it will be not long before the roasters begin large-scale buying.

"Roasters have adopted a `just in time' buying tactics and as a result, prices are not rising despite projections of lower crop in Brazil and Vietnam," Mr Mandanna said.

"Just in time" is buying of coffee by roasters only when need arises. Currently, roasters are buying for hand-to-mouth existences hoping that prices would fall in the next couple of months on hopes that Brazil could produce as much as 50 million 60-kg bags. But it has now been pruned to 42 million bags. This, according to Brazil authorities, is just enough to meet the export demand of 26 million bags and domestic consumption of 16 million bags.

In New York, arabica prices increased by two per cent on Monday but it slid a bit on Tuesday. The active March contract closed at $1.0240 a pound against $1.0290 during the weekend, while December contract slid to 98.65 cents a pound, down 40 cents.

In London, robusta for January delivery was quoted at $1,036 a tonne on Wednesday, down $1 against Tuesday's close, while November contract was up $6 at 1,042.

"We expect roasters to buy as stocks continue to decline. Arabica cherry has good prospects to touch Rs 4,000 a bag," Mr Mandanna said.

Meanwhile, rains in the growing areas are causing concern. "We don't mind rains when coffee is in the plant but once we bring it to the barbecue, rains will spell trouble," Mr Mandanna said.

Industry sources said the current spell of rains in the South had delayed the ripening a bit but Mr Ramesh P. Rajah, President, Coffee Exporters Association of India, said arrivals of crop were likely to be on time, starting December.

However, the crop, especially arabica, is reported to have been affected by the white stem borer. On the other hand, exports continue to lag behind this year. According to the Board, it has issued permits for export of 1.58 lakh tonnes till Tuesday against 2.10 lakh tonnes during the corresponding period last year. Actual shipments confirmed are 1.46 lakh tonnes compared with 2.07 lakh tonnes.

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