Plantations look to Weather Gods with hope

The beleaguered plantation community, which bore the brunt offreak weather patterns across all Southern States during the year, coupled with rise in production costs driven by higher wages amidst dip in realisations, is hoping to overcome the impact of all these challenges in the new year.

While there has been a marginal improvement in prices of commodities such as coffee, tea, cardamom, pepper and rubber, the growers feel that such a trend will not help them offset their losses as other costs have been going up. The erratic climatic pattern being witnessed in recent years has impacted the sector badly.

“We hope there will be some normalcy in climatic pattern in the New Year” said AL RM Nagappan, President, United Planters Association of South India. “Only if there is a normalcy in climatic pattern, we can get back to normal,” he said.

“If the climate doesn’t play a spoilsport, growers are hopefully looking at an opportunity to come out of the whirlpool of financial crisis during 2020,” said Ajith B.K, secretary of Association of Planters of Kerala (APK).

APK has approached the Kerala government for policy support to increase returns from unit area of plantations so that the sector can be protected from depressed prices for plantations crops.

Tea plantations

The year 2019 witnessed the impact of climate change in the tea sector. During summer, the daytime temperature was about 40 degrees Celsius and the delay in the onset of South-West monsoon held up the first flush crop.

The SW monsoon was “low duration, high intensity” in nature, resulting in floods and damage to the crop and infrastructure, said Ajith. The vicious cycle of “high cost of production and low prices” continued to haunt the sector in 2019. The production during calendar 2019, till September, was 41.5 million kg in Kerala, which was more or less the same as the previous year.

The rising cost of production due to increase in wages and pricier inputs was also a challenge. The prices fetched are far below the cost of production, said Venkataraman Anand, Whole Time Director and Chief Executive, Harrisons Malayalam Ltd.

Tea output

The North Indian crop has been rising year-on-year and is now at 27.6 million kg, higher than the same period in 2018 while the South Indian production was 6.4 million kg, lower than the same period in 2018. The auction average for January-October 2019 in North India was up by ₹3.61 to ₹155.33 per kg in 2019 from ₹149.71 in 2018.

The South Indian auction average for the same period was up by ₹1.20 per kg to ₹104.61 from ₹103.41, he said, adding that exports in January-October registered a drop of 1.7 mkg at 206.7 mkg from 208.4 mkg in 2018.

On the industry expectations, he said there is still good demand for quality teas and the government should help estates to migrate to quality segments by helping them modernise factories and going in for replanting old areas.

Coffee rally

The current uptrend in coffee prices, driven by the global trend, has rekindled the hopes among growers, who are in the midst of harvesting the arabicas, the mild and premium variety. Reports of small shortage in global supplies of Arabicas coupled with a stronger Brazilian currency against the US dollar has sparked the current rally.

Farmgate prices in rupee terms are up by about a fourth at ₹8,700-8,900 per 50 kg bag levels from ₹7000-7100 levels at the beginning of 2019 for the Arabica Parchment variety. However, the price increase has been marginal for other varieties such as Arabica cherry and Robusta parchment among others.

“The price increase in Arabicas is a welcome relief. We hope the rally is sustained and the prices move up further in the year ahead, which is crucial for the growers to come out of the current crisis. Also we are looking forward to a steady weather pattern,” said Shirish Vijayendra, Chairman of the Karnataka Planters Association (KPA), the apex growers’ body. Karnataka is the largest producer of coffees accounting for over two thirds of the country’s output, estimated around 3 lakh tonnes.

Rubber sector

The last two years have been most traumatic for natural rubber following the drop in prices, disruption in production on account of weather-related issues, and fungal diseases. To top it all, imports reached their peak. This has badly threatened the natural rubber economy, which has been under severe strain for the last five years following the crash in prices, said Santhosh Kumar, Executive Director (Rubber Operations), Harrisons Malayalam Ltd.

The production is expected to be around 0.73 million tonnes in the current fiscal, while consumption would be 1.25 million tonnes. The weather has been adversely affecting production. Long and incessant rains, flooding, leaf fall due to fungal pathogens, etc., have affected production, he said.

Besides, prices significantly lower than the cost of production kept more than 30 per cent of growers away from tapping. Kumar pointed out that the situation in 2020 may be no different with hardly any expectation of a significant change in the production scenario which would remain not more than 7.5 million tonnes. Global prices, too, remained subdued and have not moved to the expected levels. Geopolitical issues, such as the US-China trade dispute, the recessive trend in the industry and commodities in particular, will impact prices.

However, Indian rubber growers can expect to see a renewed upturn in prices at the beginning of the year as a result of supply constraints and early defoliation seen this year. Prices may move north but have still a long way to go before they reach viable levels, he said, adding that early rains and favourable weather conditions during the production season will be determinants of a better harvest as the production system has been adversely hit the second year in a row.

Cardamom

Cardamom prices moved up sharply in 2019 on the back of a drought till April and poor rains with high temperature in May followed by floods in August. Also, the rains have been poor in November and December. The late crop looks uncertain for now. The prices have moved up to ₹3,700 a kg.

The total arrival for calendar 2019 was 17,000 tonnes compared with 26,000 tonnes in 2018, registering a 35 per cent drop. The actual crop this year was only 50 per cent of last season’s crop, said SB Prabhakar of Pambadampara Estate in Idukki.

If spring showers are delayed beyond March 10, the prices could move up beyond ₹5,000 a kg in the next two months. There could be a correction from June-July and it could come back to ₹2,000 levels by October, he added.

He attributes the surge in prices to the rising global demand coupled with a shortfall in Guatemala production. This is the first time that the production has fallen sharply in both the major producers. Guatemala experienced a drought this season. Also, the strong Guatemalan currency quetzal is leading to dollar price increases in cardamom.

“I also expect expansion in area in Guatemala and better care of farms in India next season. There will be some expansion in India as well. This will lead to a surge in production from 2022 onwards leading to further fall in prices. However, as cardamom is highly climate sensitive, it is difficult to predict the future,” Prabhakar said.

However, industry sources pointed out that growers were unable to reap the benefits of high prices due to increase in wages and other input cost for maintaining plantations, which has gone up by nearly 100 per cent. If such price levels are not maintained by 2020, growers may not be able to get positive returns.

Pepper scene

The year 2019 was bad for the pepper sector as prices hit a five-year low. The price stands at ₹330 a kg. The main reason for the fall in prices was the surge in imports, taking advantage of various free trade agreements, Upasi officials said.

According to Kishore Shamji of the Kochi-based Kishore Spices, imports have slowed to 2,500 tonnes from Sri Lanka. But imports for re-exports are continuing. Production has been declining in Kerala, and hovering at 20,000-25,000 tonnes, while in Karnataka, Tamil Nadu and Andhra Pradesh, it is on the rise. Climate change has impacted production which was 57,000-60,000 tonnes in 2018-19. This year, the sector is expecting 60,000-65,000 tonnes.

On the outlook, Shamji said cloudy climate has delayed plucking, as farmers are hoping for 4-5 days of good sunshine for drying. Besides, labour shortage is also affecting the sector. Prices would depend on the demand in the consuming markets. However, trading offtake has been low due to agitations in North India, but it is expected to pick on rising industry demand.