The Hindu Business Line : Weak rupee boosts coffee exports' unit value

Weakening of the rupee against the dollar has led to high export earnings from coffee exports, though there has been a decline in shipments this year.

As against 1,19,923 tonnes from January 1 to June 2008, total exports during the corresponding period this year stood at 96,661 tonnes. There has been a significant fall in the exports of instant coffee and re-exports this year.

However, the unit value realisation from exports has improved during the first half of the current financial year (April-Sept 2008-09) to Rs 112.43 a kg from Rs 93.43 a kg in the corresponding period in 2007-08 and Rs 80.63 a kg the previous fiscal.

According to the International Coffee Organisation (ICO), movements in the exchange rate of the dollar against the Indian rupee were favourable to export earnings between January 2006 and February 2007. On the other hand, the movement of the dollar between March 2007 and August 2008 contributed to a reduction in export earnings. However, the situation has improved after September 2008, it said.

World consumption in 2008 was around 128 million bags, compared with 126.7 million bags in 2007. Despite the economic crisis, no significant changes in world consumption patterns have been observed.

The weighted average price on May 12 for other mild Arabica in New York was at 152.26 US cents/lb and for Robusta it was 77.36 cents/lb. The exchange rate was Rs 47.90 a dollar.

Exchange rate movements

In fact, a brief analysis of the impact of dollar movements against the currencies of major coffee producing countries shows that these have contributed to strengthening or reducing the positive impact of rising prices in the world coffee market.

In the cases of Brazil and Colombia, exchange rate movements have offset much of the increase in US dollar prices recorded in the recent past. In contrast, Vietnam, Ethiopia and Mexico benefited from exchange movements of the US dollar against their national currencies, the latest ICO report said.

Production shortfall

According to the ICO, the impact of the shortfall in Colombian production continues to influence the market and coffee prices rose sharply during May 2009, with the monthly average of the ICO composite indicator price at 123.05 US cents per lb compared with 111.61 US cents per lb in April. The increase was particularly marked in the case of Colombian Milds with prices rising to 212.05 US cents per lb, their highest level since June 1997.

Meanwhile, the world coffee production in 2008-09 is expected to be 126 million 60-kg bags, down from the May estimate of 127 million bags, the ICO report on Monday said. The revision, however, is a 6.8 per cent production increase on the year.

Reasons

The ICO attributes the lower estimate to a fall in production in several countries, including Indonesia, Ecuador and Guatemala, to unfavourable weather and high fertiliser and labour costs.

Exports by all exporting countries in April 2009 totalled 8.3 million bags, bringing the cumulative total for October 2008 to April 2009, that is, the first seven months of coffee year 2008-09, to 57.2 million bags compared with 55.5 million bags for the corresponding period in the previous year, an increase of 3.13 per cent. The fall in exports of Colombian Milds and other Milds was largely offset by increased exports of Brazilian naturals and robustas, it said.

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