Muted demand from Europe to weigh on Indian coffee shipments in 2021

Indian coffee exporters see marginal growth in shipments for calendar 2021 even as the second Covid wave in Europe, their largest market, continues to weigh on demand.

“The second Covid wave, which has impacted out-of-home consumption in key markets such as Italy and the UK, among others, is hurting Indian coffee shipments,” said Ramesh Rajah, President, Coffee Exporters’ Association.

“The order position is still weak. People are not buying much forward and are resorting hand-to-mouth. Normally, buyers take positions for six months, but now its need-based,” Rajah added.

So far, export volumes in the new year have been partially better, which Rajah said was due largely to carry-over orders from the previous year. The overall volumes were up 4.4 per cent at 42,983 tonnes between January 1-February 19, over the same period last year (41,159 tonnes). This is mainly on account of an increase in green bean shipments, which rose by about 24 per cent at 33,661 tonnes. However, re-exports declined 34 per cent at 9,322 tonnes during the period, pulling down overall growth. In value terms, the Jan1-Feb 19 exports stood at $106.60 million, higher by about 11 per cent over the same period last year.

Rajah said the out-of-home or the cafe segment in Europe, which has been badly hit by Covid containment, has hit shipments of premium Indian coffees, mainly the robusta parchment. Demand, however, was good for the cheaper robusta cherry coffees. However, the Indian Arabicas, which are ruling much higher than those from Colombia and the Central American regions, have not seen much demand, Rajah added.

“The demand from Italy, the largest market, is still weak, while the offtake from Germany is better. What is going to Italy was contracts deferred from last year,” Rajah said, adding that exporters are focussed on retaining their existing markets rather than exploring new ones.

Rajah further stated that overall exports in calendar 2021 should be marginally better. “We may not reach the 2019 level, but we will be better than 2020.”

In calendar 2020, India’s coffee exports were down by 12 per cent at 3.08 lakh tonnes, hit by the Covid lockdown. Italy, Germany and Belgium were the top three markets for Indian coffee exports in 2020, accounting for over a third of the shipments.

Besides muted demand, Indian exporters are also grappling with factors such as a strengthening rupee against the dollar and rising freight rates amidst container shortages. “The strengthening rupee is hurting everybody,” Rajah said, adding that the delay in release of export incentive under MEIS/ RoDTEP is adding to the confusion. The MEIS incentive of 3 per cent had not been released since September last and exporters are factoring in the same rate while pricing their coffees.

The Coffee Board in its post monsoon estimates had pegged the 2020-21 crop starting October at 3.42 lakh tonnes as compared to 2.98 lakh tonnes in the previous year. The harvest of arabicas is almost over, while growers are in the midst of picking the robusta crop. The recent unseasonal rains, coupled with hailstorms in parts of North Kodagu, has interrupted the harvest, while delaying the process of drying coffees in other regions such as Hassan and Chikkamagaluru, growers said.

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