Coffee prices have been on a slide since the beginning of the year. The “distress sale” in the export market is continuing with no recovery in sight on the price front in the coming months.
In the international market, arabica coffee prices were trading around 140 cents per pound in June last year. At the beginning of June this year, prices had come down to 120 cents per pound and in the past one month prices continued their slide towards 106 cents per pound, a drop of around 12 per cent.
Robusta coffee too has been trading with a negative bias. But robusta prices have seen a little more volatility in the past few months in comparison with arabica and the decline has not been steep either. Prices in the international market were trading around 88 cents per pound in January and are currently at 77 cents per pound.
In June, Brazil had a dry weather and this aided harvesting of arabica beans. Harvest of robusta beans too is advancing at a good pace. Large coffee producers like Brazil, Columbia and Vietnam are heavy on arabica crop. In the past few years, these producers have done away with the alternative on-off seasons that used to vary global coffee production year after year. Large-scale mechanisation, re-plantation and crop augmentation initiatives have seen these countries increasing production year-after year.
In case of Columbia, the government-aided re-plantation has worked well for the sector. With the new plants starting to bear fruits, Columbia has been able to increase production to levels last seen in the first half of 1990s. It has also recovered from the coffee leaf rust crisis.
“The Indian coffee market follows the international price trends and hence our prices too have been trading negative, despite lower production. Domestic production has been coming down in the past few years. This year too, we expect a smaller crop. But prices may not move up as the broad international trends are negative for price movement,” said Ramesh Rajah, president, Coffee Exporters Association.
From around 120,000 tonnes five years back, arabica production has fallen to below 90,000 tonnes. The robusta crop too is hit by a bad crop year as the production is expected to be around 200,000 tonnes this year against 240,000 tonnes last year.
However, lesser availability and lower prices have not hit exports. “Farmers know the broad trends are negative and hence holding on the stocks in anticipation of higher prices is futile. Indian coffee that used to be sold in the international market at a premium of 18-20 cents, is not able to demand a premium now. They have to export more quantity now due to lower price realisation. It is a kind of distress sale,” said Rajah.
Between January 1 and July 5, the country exported 2,23,514 tonnes of coffee against 2,01,209 tonnes in the same period last year — up by 11 per cent.
Going ahead, prices are expected to continue their negative trend in the coming months. According to the International Coffee Organisation, the stock levels in most coffee consuming countries are high. The supply has been increasing in the past few years due to higher exports, while consumption has been largely stagnant.