Agri Business

Indian coffee growers gain on Brazilian woes

MR Subramani Chennai | Updated on October 09, 2014 Published on October 09, 2014

Sergey Nivens/

Prices steam up on fears over the LatAm country’s crop; planters here expand acreage

Your favourite cup of filter coffee or latte or cappuccino is set to get costlier as domestic bean prices have surged to record highs. This follows a rally in the global market on the back of the Brazilian crop running into problems due to dry weather.

Corporates owning coffee estates such as Tata Coffee and Amalgamated Bean Coffee Trading Company – which runs Café Coffee Day – could gain as a result. Nestle and Hindustan Unilever, which source coffee, could be shelling out more for their products.

Record prices

Currently, farm gate prices of Arabica parchment are quoting at a record of over ₹12,000 for a 50-kg bag, while robusta parchment is ruling near ₹8,000.

Robusta cherry is being quoted around ₹3,750 per 50-kg bag. Robusta cherry accounts for over 40 per cent of coffee exports totalling three lakh tonnes in the last couple of years.

Brazilian output

“We are looking at a scenario which we last saw in 1977 when a disastrous frost affected the crop in Brazil. Dry weather earlier this year affected coffee production in Brazil. The crop this year has been estimated at 40.1 million bags (60 kg each). Now, Met forecasts of the crop’s blossom shower being delayed have fired up the market,” said Anil K Bhandari, a planter and former president of United Planters’ Association of Southern India.

Rains are crucial during September-October for the Brazilian coffee crop. But forecasts say that no showers are likely till the end of the month. This means, the already stressed coffee plants could be weakened further and production could be hit next year too, said Bhandari.

Coffee trade across the globe now fears that next year’s crop could be lower than 40 million bags. This has resulted in prices surging to near 30-month high of $2.20 a pound. On Thursday, coffee on ICE US for delivery in December ruled at $2.175 a pound.

“Domestic prices are high in line with global prices. Availability is low since we are at the fag end of the season,” said Ramesh Rajah, President of Coffee Exporters’ Association.

“But, there are no buyers in view of the high prices,” said Bose Mandanna, a grower from Kodagu and former Vice-Chairman of the Coffee Board.

“Since the market is volatile, buyers are staying away. They don’t want to take risk. Once the market stabilises, they will return. Also, coffee prices cannot continue rising and lose consumers,” said Bhandari.

Few deals have been signed for the new crop, said Rajah. “Not much business has been done for the new crop in view of the problems we faced with the crop last year,” he said.

Domestic crop situation

Last year, the Coffee Board had initially projected production of 3.47 lakh tonnes but finally, it turned out to be 3.04 lakh tonnes as the crop was affected by unseasonal rains.

“Indian Arabica is expensive in the global market as also the Robusta. But when Brazil is short, there will be demand for the Indian produce,” said Rajah.

“Coffee export value can increase this year in view of the high prices,” said Bhandari, adding that the key was the new crop that is shaping up well.

“Arabica has suffered loss due to the borer menace but Robusta has shaped up well,” said Bhandari.

“Harvest has begun in Tamil Nadu and in Karnataka, it will start next month,” said Mandanna. “The crop is much better than last year. Robusta will be 10-15 per cent higher, while Arabica has been affected by the white stem borer,” he said.

Rajah said coffee production this year will be in line with the Board’s projection. According to the Coffee Board’s post-blossom estimates, production this year could be a record 3.44 lakh tonnes with Robusta making up 2.39 lakh tonnes and Arabica the rest.

Area expands

Higher prices this year and forecast of the rally continuing next year have resulted in growers expanding the area under coffee.

According to sources, nurseries have run out of coffee plants in view of demand.

“Coffee is being planted on large plantations where the borer menace has resulted in lot of vacant space being available. Some growers are shifting to coffee from crops such as cardamom,” said Mandanna.

Sources said coffee plantations in Karnataka are now extending to plains such as Piriyapatna in Mysore.

“We will have to see how far it can be sustained. Such a development took place in 1977 also,” said Bhandari. “The problem is coffee will take time to give returns. People should be able to sustain till then,” he said.

Published on October 09, 2014
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