Aroma returns. As coffee prices rebound, growers resort to more of ‘consignment sales’

Raw coffee prices have rebound over the past few days, providing some relief to beleaguered growers. As a result, a majority of the growers are resorting to more of “consignment sales” rather than the “outright sale” of the beans.

Through consignment sales, growers are storing their produce with the coffee curers, anticipating prices to go up in the days ahead. The firm trend in prices in recent days points to the crop being lower than initial estimates, stakeholders said.

Farmgate prices of raw coffee such as arabica parchment, which ruled at ₹13,000-13,500 per 50-kg bag at the end of December, are now hovering at around ₹14,750-15,100, an increase of around 11-13 per cent. Similarly, arabica cherry prices are currently ruling at ₹7,200-7,450 (₹6,450-7,000 as of December 29, 2022).

Robusta parchment prices are hovering around ₹9,800-10,300 levels (₹8,000-8,300), while the robusta cherry is ruling around ₹4,600-4,900 (₹4,300-4,550).

Battling challenges

The harvest of the mild variety arabicas is almost over, while growers are busy picking the robusta beans across the key growing regions of Karnataka, which accounts for over two-thirds of the country’s coffee output. In the early part of the harvest season during December, growers were disappointed as prices had eased from the October highs, but the latest rebound has given them some relief. Coffee growers have been battling challenges such as changing climate patterns, higher input costs and shortage of trained labour.

“Arabica production is down compared to the initial estimates as a majority of the growers have harvested a lower crop. However, compared to the last year, the arabica crop will be slightly more this year. The robusta crop is down. In fact, robusta prices are ruling quite firm as the world market is also sensing some shortfall,” said Mahesh Shashidar, Chairman, Karnataka Planters Association, the apex coffee growers body.

Bose Mandanna, a large grower in Suntikoppa near Madikeri, attributed the improvement in prices to the demand situation. “The crop is not that great as there was damage due to excessive rains and those who have commitments are trying to cover up,” Mandanna said.

Need-based buying

Ramesh Rajah, President, Coffee Exporters Association, said a lower arabica crop was the reason for higher prices, even as the export demand is slow as overseas buyers are resorting to more need-based buying. “Order books are low from what we hear,” Rajah said, adding that the impact of the recession in the West on coffee consumption is not clear.

Rajah said the coffee arrivals are slow this year compared to normal years as growers, expecting prices to firm up further, are resorting to more of consignment sales. Coffee arrivals, in a normal year peak during February. “This year the proportion of coffee going into storage and not being sold, seems to be very high” Rajah said.

As 97-98 per cent of the coffee growers lack storage space, they tend to store their produce with curing works. “The proportion of consignment sales are more this year as compared to the outright sales,” said a coffee curer in Chikkamagaluru. In a consignment sale, growers store their produce with the curing works and sell it at a later date .

The state-run Coffee Board in its post monsoon estimate had pegged higher the 2022-23 crop in Karnataka. Arabica output is seen higher at 72,945 tonnes (68,025 tonnes in the previous year) and robusta at 1.81 lakh tonnes (1.73 lakh tonnes). Overall Indian crop for the 2022-23 season is seen higher at 3.60 lakh tonnes as per Board’s post monsoon estimates over previous year’s final estimate of 3.42 lakh tonnes.

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