Rise in consumption, weak global demand hit India’s coffee exports

Exports in 2014-15 have been sluggish and 2015-16 exports are forecast higher at 5 million 60 kg bags. Domestic consumption shows signs of marginal improvement on a low per capita basis, the US Department of Agriculture (USDA) said in its latest report.

The Dollar Business Bureau Coffee Increasing domestic consumption and weak demand in the European markets have led to a continuous fall in India’s coffee exports. The value of coffee exported by India in April 2015 was $77.5 million, about 25% lower than that recorded a month ago, as per data issued by the Ministry of Commerce. Though India registered a marginal increase of 0.52% in coffee exports between April 2014 and March 2015, as compared to the previous year, the country’s overseas shipment is expected to fall by 5.6% during the ongoing marketing year till September. India's coffee exports are likely to decline to 4.7 million bags in the ongoing marketing year ending in September due to weak demand from major European buyers, the US Department of Agriculture (USDA) said in its latest report. The country had exported 4.98 million bags of coffee during the 2013-14 marketing year (October-September). In April this year, India exported coffee worth $77.5 million, down 6.39% compared to $82.8 million registered during the same month in 2014. According to the International Coffee Organization (ICO), the global demand of coffee is likely to increase by about 25% in the next five years as consumption has been rising in countries like India, China and Latin America due to rapid pace of cultural urbanisation. ICO estimates that coffee demand is expected to jump to 175 million bags by 2020, from 141 million bags in 2014. On the other hand, coffee production in India is estimated to be slightly higher at 3.31 lakh metric tonnes in 2014-15 marketing season, as against 3.04 lakh metric tonnes produced a year ago, the Coffee Board data said. Usually, India exports about 90% of its coffee yield and the major export destinations for Indian coffee are Italy, Germany and Russia. But this time, overseas shipment has been affected due to weakened demand from European buyers. However, India's Robusta coffee variety continues to be the favourite choice of international buyers. This is proven by the firm price of Robusta coffee in the global market. To compare quickly, the average price of Arabica coffee variety at the International Coffee Organisation (ICO) indicator have declined by 15% between January and March 2015, while Robusta prices remained firm. “Robusta prices are expected to remain firm until the onset of the next harvest as strong foreign demand pressures Indian supplies,” the USDA said. Experts however forecast that the falling supply from Brazil – the world’s largest coffee producer – is likely to affect global demand and add to Indian coffee exports in the coming months. (Production in Brazil is expected to fall due to the lack of rainfall in many parts of the country.) Further, depreciation of the rupee against the dollar could mean better days ahead of India’s coffee exporters. We’re surely hoping India’s coffee exporters remain excited and economically intoxicated.    

May 27, 2015 | 8:59 pm IST.

The Dollar Business Bureau - May 27, 2015 12:00 IST