Agri Business

Fall in output to worsen coffee sector crisis

Vishwanath Kulkarni Bengaluru | Updated on February 19, 2020

As the harvest of coffee enters the last phase in the key producing regions of Karnataka and Kerala, a large section of growers are not happy despite the beans fetching slightly higher prices than last year’s.

A lower crop harvest, mainly due to the berry droppings triggered by excess rains in October and November last year, has upset their calculations. As a result, the crisis in the coffee sector witnessed over the past few years is set to continue in the year ahead, triggering demand for government intervention from growers.

Growers’ plight

“The government should come to the rescue of growers, who have been dealing with high production costs and weak realisations. This year, prices are slightly better but the growers don’t have the crop. As a result, the defaults in repayment of loans in the sector could rise,” said UM Thirth Mallesh, President, Karnataka Growers Federation (KGF), an organisation of mainly small- and medium-sized growers.

Growers of Arabica variety have been badly impacted by the excess rains last year and the crop harvested in the 2019-20 season could be one of the lowest. “Several growers in the Chikmagalur region could harvest only 2-3 bags of 50 kg per acre this year as against a normal of 6-8 bags per acre,” Tirthmallesh said.

Plea for interest waiver

To help overcome the crisis in the sector, the government should waive the accumulated outstanding interest on coffee loans, estimated at around ₹2,000 crore, Tirthmallesh said. Also, the government should extend the six per cent interest subvention to growers to reduce their interest burden. Growers are currently paying an interest of 9.5 per cent, he said. Total outstanding for the coffee sector is estimated at around ₹10,000 crore, Tirthmallesh said.

Karnataka accounts for about two thirds of the over 3 lakh tonnes of coffee produced in the country.

Shirish Vijayendra, President of the Karnataka Planters Association, said the yields have dropped by 30-40 per cent this year, making it difficult for growers to recover the production costs.

“We are in very deep trouble and passing through difficult times. The government should consider a package to restructure our loans, like the Special Coffee Term Loan, to help growers overcome the crisis,” Vijayendra said.

While Arabica prices are higher by about a tenth over last year, robusta prices are slightly weak over last year’s. Moreover, the prices of pepper, an intercrop grown with coffee, are also trending weak at around ₹310 per kg.

Lower exports

“Arabica crop is definitely lower, while robusta would be similar to that of last year. So the exports would be lower this year,” said Ramesh Rajah, President, Coffee Exporters Association. A weak trend in exports is already reflected in the shipments during January, which were down by 15 per cent.

Rajah said Indian prices are way above international parity and many buyers are thinking of switching to other origins.

MC Kariappa, President of Codagu Planters Association, said the overall crop seems less based on the pickings, so far. A marginal increase in price when the crop is low will not help the growers, he said. Moreover, the shortage of labour and the increase in wage costs has also added to the plight of growers.

According to the Commerce Ministry, about 43 per cent of coffee-bearing areas in Karnataka and Kerala were impacted by extreme weather conditions last year and the crop loss was pegged at 33 per cent.

India’s coffee output in 2018-19 stood at 3.19 lakh tonnes – 95,000 tonnes of arabica and 2.24 lakh tonnes of robusta.

Published on February 19, 2020

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