Indian coffee exporters fear robusta price rally could lead to flight of customers to other origins

Indian coffee exporters fear that the current surge in robusta prices could lead to flight of customers to other cheaper origins in Africa and Asia. Global prices of robustas are at a three decade high on weather induced supply issues in top producer Vietnam.

The Indian robustas are expensive over other origins as they command a significant premium over the terminal prices in London. Premiums for the Indian Robustas Parchment AB are currently hovering around $700-750 per tonne over the London terminal prices. Similarly, the Robusta Cherry AB is commanding a premium of around $350-400 per tonne.

Farmgate prices of robusta parchment prices are up by 27 per cent since late December, while that of robusta cherry is up by around 16 per cent.

High prices

Ramesh Rajah, President, Coffee Exporters Association, said the buyers have started showing resistance to these high prices. “The price rise is a double-edged sword. While it is good for growers in the short-term, the long-term risk is that many roasters may decide to remove the use of robusta parchment and may switch over to the other origins,” Rajah said adding that robustas from all other origins including Africa, Indonesia and Vietnam are cheaper than the Indian coffees.

“Buyers are also facing resistance from their end consumers and are thinking of alternate methods. May reduce Indian robustas and may include more from other origins,” he added. Europe is the main market for Indian coffees. Besides the global surge in prices, the cost of higher freight from India to Europe, due to the disruption in Red Sea region, is adding to the costs.

Also the thin market arrivals of coffees, especially the robusta parchment, have made the exporters cautious as growers are seen withholding their produce anticipating further increase in prices.

“There’s not much of coffee coming into market. Previously robustas used to flow into the market as soon as it gets harvested. Now it is being withheld as most farmers are not under pressure to sell. As a result, exporters are not committing to new orders as we are not sure of getting coffees. Exporters are covering for earlier orders and focussed on fulfilling them. The volume of order taking has dropped sharply,” Rajah said.

Exports rise

In the current calendar year till March 13, India’s coffee exports were up 16 per cent at 94,444 tonnes over same period last year’s 81,398 tonnes. While exports of India grown coffees were up around 17 per cent at 75,559 tonnes till March 13 over same period last year’s 64,670 tonnes, the re-exports stood at 18,885 tonnes, up 13 per cent from corresponding last year’s 16,728 tonnes. India imports coffees to re-export them as value-added coffees.

In India, the robustas account for over two-thirds of the total coffees of around 3.5 lakh tonnes produced in the country, while arabicas account for the rest. The Coffee Board, in its post-monsoon estimates, has pegged the 2023-24 crop starting October at 3.74 lakh tonnes comprising 2.61 lakh tonnes of Robusta and 1.13 lakh tonnes of arabicas. Exporters estimate the production of robustas during 2023-24 to be between 2.6-2.8 lakh tonnes while Arabica output is expected to be between 75,000-80,000 tonnes, Rajah said.

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