Coffee farmgate prices rise on global trend

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M.R. Subramani

Chennai, Dec. 16

FARMGATE prices of coffee have improved this week, keeping in tune with the global trend. However, buyers of Indian coffee find it a little high to make commitments.

"Farmgate prices are up this week compared with last week. This is since prices for arabica in New York and robusta in London have improved. Though the prices fell during the middle of the week, they are still higher than what it was last week," a plantation source said.

Arabica parchment are currently quoted at around Rs 3,700 for a 50-kg bag, while robusta cherry is quoted at Rs 1,475-1,500 a bag.

One of the reasons for the bullish trend in the global market this week has been further pruning of Brazil's next crop and green coffee stocks in the US warehouses falling below the psychological mark of five million bags of 60 kg. Brazil's crop for the season starting June next is now projected between 40.2 million and 42 million bags from earlier estimates of around 44 million bags.

Though Brazil is reported to have over 20 million bags private stocks, it is seen as being unable to meet the demand. Coffee prices pared some of their losses on Thursday in New York and London. In New York, the active March arabica contract closed at 97.85 cents a pound, up 1.15 cents over Wednesday. May contracts ended at 100.15 cents, up similarly from previous trade.

In London, robusta coffee was quoted at $1,147 a tonne on Friday for the March contract against $1,146 on Thursday. "Things are fine as far as exports scenario for robusta is concerned but it is not so in the case of arabica," an exporter said.

According to Mr Milan Shah, an exporter in Bangalore, domestic arabica physical prices are not reflecting the global trend. "Prices are at least 1-2 per cent higher than the expectations of international buyers," he said.

Currently, most of the deals are being struck with last season's crop that ended in September. Arrival of new crop in the market is expected in a week or so with arabica harvest on. Robustas will hit the market in January.

A plantation source said though farmgate prices were higher than the rates at the Indian Coffee Trade Association (ICTA) auctions, coffee was being bought from the growers. "Two days ago, a buyer bought good quantity of arabicas at Rs 3,650 a bag," the source said.

Meanwhile, at least 10 per cent of the arabica crop has been harvested. "The flier harvest has been done. Main harvest will begin but planters are saying that the white stem borer has wreaked the crop severely," said Mr Bose Mandanna, a planter and former official of the Coffee Board.

While world-over there is only a single picking, in India there are three pickings for coffee. First is the flier where 10 per cent of the crop is harvested, then the main picking where 60 per cent of the crop is harvested and the strip picking account for the rest of the crop.

Plantation sources said the final figures of the coffee production could be lower than the post-monsoon estimates of 2.82 lakh tonnes made by the Coffee Board.

In its post-blossom estimates, the board had projected a production of 2.94 lakh tonnes but white stem borer and heavy rains have taken a toll on the crop.

"We feel the projections could be even lower because growers are finding not much coffee after the initial harvest. Maybe, people have been misled by dense growth," said the plantation source. "We are sure the final figures will be lower," they said.

(This article was published in the Business Line print edition dated December 17, 2005)
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