Indian coffee export value dips despite high global prices

Coffee prices in the international market touched a two year high in October 2014 but local exporters might have failed to reap the fruit

Vanita Peter D’souza | @TheDollarBiz

Coffee-Beans-TheDollarBusiness High domestic prices in India are likely to dampen exports this year

  Global prices of coffee have surged this year due to a supply crunch in Brazil, but Indian coffee exports show no signs of a recovery in terms of value, as per the latest estimates by the Ministry of Commerce. According to the International Coffee Organisation (ICO), average prices touched a high of around 185 cents/lb in Oct 2014, up 85% compared to year ago levels of around 100 cents/lb. ICO says that this price swing is almost entirely due to weather reports from Brazil, with dryness at the beginning of the month spurring prices higher, before scattered showers dampened any bullish spirits. ICO adds, “The discussion is now centred on whether damage to the 2015/16 crop is already irreversible, and to what extent these rains can encourage new flowering.” This may wilt any hopes of increasing exports in terms of value by India because output in Brazil is now expected to improve. India is among the top 10 coffee exporters, but Indian exports tell a different story this year. Ministry of Commerce data shows that India’s coffee exports are down around 5.2% y-o-y to around $49.97 million in October 2014. This is partly due to high domestic prices on fears of a lower crop and increasing wages.ICO prices - TheDOllarBuisness While a USDA report predicts that India’s coffee production is likely to remain almost unchanged at around 300,000 tonnes in MY2014-15, coffee growing places such as Andhra Pradesh and Odisha have reported losses of around 1,000 tonnes due to the recent Hudhud cyclone. Coffee growers in Southern states of India also expect a smaller crop due to untimely rains. Meanwhile, Indian coffee prices are soaring, with average 2014 prices standing at around 220 cents/lb, up about 49% y-o-y. This suggests that Indian coffee export sales are unlikely to improve in the coming months. USDA says, “Indian coffee remains high-priced in the global markets. Demand remains sluggish as buyers are withholding major purchases in anticipation of newer crop arrivals.” In addition, international coffee prices are declining. The Coffee Board said last week, “ICE Arabica coffee futures took its biggest tumble in a month in modest dealings on Thursday (November 20), giving back the prior session's steep gains after a U.S. government attaché upwardly revised output for Brazil's past - crop and Colombia's current crop. ICE March Arabica coffee futures closed down 10.25 cents, or 5.2 percent, at $1.8885 a lb. LIFFE January Robusta coffee futures closed down $13, or 0.6 percent, at $2,078 a tonne.” Overall, global coffee trade has remained sluggish in MY2013-14. According to ICO, world coffee exports amounted to 111.29 million 60 kg bags (6.67 million tonnes) in MY2013-14, which is down about 1.5% from around 113 million bags (6.78 million tonnes). In the twelve months ending September 2014, exports of Arabica totalled 69.03 million bags (4.14 million tonnes) compared to 69.11 million bags (4.15 million tonnes) last year; whereas Robusta exports amounted to 42.26 million bags (2.5 million tonnes) compared to (2.6 million tonnes) in the previous year. Italy, Germany, Russia, and Belgium are the top markets for Indian coffee, while India imports small quantities (which can increase this year) of coffee from Brazil.

 This article was published on November 24, 2014.

The Dollar Business Bureau - Nov 24, 2014 12:00 IST
 
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