Coffee exporters turn cautious as Arabica harvest begins

After having burnt their fingers by selling coffee in advance last year, Indian exporters have turned cautious in taking positions for the new crop, even as the harvest of the arabica beans has commenced over the past few days in the country’s key growing regions of Coorg and Chikmagalur.

The pickings of Arabica – the mild and premium variety beans – have been advanced by about a fortnight this year on account of timely rains.

Coffee harvest in India usually runs from mid-November to January for the arabica variety, while the robusta pickings are done between January and March. However, the carry forward stocks and the current downward trend in pricing is seen posing a challenge to both growers and the exporters.

“The next few months are going to be tough for the coffee industry. There is lot of carryover stock and the prices are not good. Further, there is an early arrival of the new crop and the exporters’ order books are very thin,” said Ramesh Rajah, President of Coffee Exporters Association.

“The price expectation of the growers and that of foreign buyers is very far apart to take a position for the exporters,” Rajah said.

Influenced by the global price trend where there is a surplus supply, the farmgate coffee prices at the beginning of the current crop year 2015-16 starting October, are lower by about 20-25 per cent compared to a year ago.

Raw coffee prices in Karnataka are hovering at between ₹7,710 and ₹8,100 per 50-kg for Arabica parchment, while the Arabica cherry variety is traded at around ₹3,500.

“No exporter is interested in selling coffee in advance this year. The order books are almost empty,” said an official at a large MNC export house.

Last year, the Indian exporters had initially sold coffees at a premium of five to eight cents over the prevailing New York Terminal prices.

However, with the actual crop turning out to be lower than expected and prices shooting up later, the exporters had to take a hit as they were forced to pay a higher price to cover up for contracts.

“Even the buyers are not forthcoming this year as they are preferring to wait and watch,” said an official at another large multinational saying that some buying could start later next month.

Growers, in anticipation of better prices, have been holding back their coffees from the previous season.

According to the industry estimates, the arabicas lying with curing houses was estimated at around 6,000 tonnes, about three times more than normal beginning stock of around 2,000 tonnes at the start of new harvest season.

Including the stocks held by growers, the inventory could be much higher, Rajah added.

The early rains have boosted the prospects with the State-run Coffee Board, in its initial estimates, pegging the crop size for 2015-16 year at 3.55 lakh tonnes, a growth of 8.75 per cent over previous year’s 3.27 lakh tonnes.

Arabica crop size for 2015-16 is pegged at 1.10 lakh tonnes, up 12.55 per cent over 2014-15’s final estimate of 97,700 tonnes.

Robusta crop size is estimated to expand to 2.45 lakh tonnes, a growth of 7 per cent over previous year.

COMMENT NOW