Agri Business

‘Buyers showing resistance to high arabica prices’

Vishwanath Kulkarni | | Updated on: Dec 03, 2021
image caption

Coffee exporters fear switchover to cheaper origins from Central America

Following the recent surge in coffee prices and rise in freight costs, overseas buyers have started showing resistance to the higher bean prices, exporters said. As a result, Indian exporters fear that their buyers could switch over to arabicas of cheaper origins from Central America region.

“We are seeing some resistance from the buyers in the Middle East for the high arabica prices,” said Ramesh Rajah, President of the Coffee Exporters Association.

“It is not just that the coffee prices are up, even the logistics costs are up for some time now. It’s a double whammy for the buyers,” Rajah said adding that there would be some impact on arabica exports for the 2021-22 season as roasters may prefer to substitute Indian arabicas with cheaper origins.

“We are seeing some switching away from India to other origins such as Honduras and Peru, particularly in the medium and large roaster segment,” Rajah said.

However, the smaller roaster, who will be reluctant to change are hesitant to give orders due to higher prices. They are hoping that the prices will come down once the arrivals pick up in India, he added.

Categorised as other milds, the Indian arabicas command a premium in the market over the New York terminal prices and are compared to the likes of Columbian and Guatemalan varieties.

Prices at record levels

Rajah said the Indian arabica prices are at record levels tracking the global trend and at least 30 per cent higher than the previous highs. Arabica prices are at multi-year high with frost impacting Brazilian supplies. In India, the extended monsoon rains are seen affecting the crop size, which growers estimate would be down by around 30 per cent. Exporters see the crop output between 60,000-70,000 tonnes this year.

Arabica exports in the current calendar year from January 1 till date stood at 48,250 tonnes out of the total shipments of 3.59 lakh tonnes. Recently, the USDA India Post has pegged the Indian exports for the 2021-22 season at 3.41 lakh tonnes.

The USDA Post expects export demand to remain strong however trade sources indicate that current prices are limiting international buyers from placing larger orders.

Export demand

“New crop arrivals from December onwards should help keep the prices in check and orders should increase, however there may be a slight reduction (3-4 percent) in the export of green beans as higher freight costs push buyers to consider sourcing coffee from other origins, such as Uganda,” the Post said.

Trade sources indicate that both domestic and international coffee prices will remain high as rising freight costs (due to shipping delays) will remain for additional 6-12 months. Trade sources indicate that the cost of shipping a container to European destinations has gone up seven-fold compared to last year.

“There is also a higher frequency of cancellations by carriers when booking space on vessels, and there are substantial delays in transit times,” the Post said.

Published on December 03, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

COMMENTS
This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you