Weak Production and Prices Drive Down Coffee Exports

CEIC India Data Talk - November 17, 2014 The India Database team is pleased to announce the inclusion of new coffee market datasets. These comprise production statistics (inclusive of plantation area and yield) and exports (which include trading partner statistics by value and by volume, and their implied per unit prices). Coffee statistics are largely sourced from India’s Coffee Board. India is one of the major coffee exporters, accounting for approximately 4.5% of total global coffee exports as of the 2013 fiscal year (ending March 2013). India is particularly known for its Robusta cherries, a higher caffeine bean mainly used in espresso, though instant and roasted are also key coffee produce exported from India. Coffee production declined to 304,500 metric tons in the fiscal year to March 2014. That was the second consecutive decline in production from 322,250 and 318,200 metric tons during the previous two fiscal years. The decline in coffee production was driven by Robusta coffee particularly in Karnataka, the south-west Indian state. Robusta coffee accounts for approximately 65-70% of India’s total coffee production. The decline in coffee production occurred despite the continuous increase in coffee plantation area during the 2007-2013 fiscal years. The coffee plantation area grew to 415,341 hectares (ha) in the fiscal year ended March 2013 from 381,085 ha in 2007. However, falling yields per hectare has neutralized and indeed, hampered overall coffee production; the average yield has fallen from its recent peak of 852kg/ha during 2012 to 809kg/ha during the fiscal year ended March 2014. This is attributable to a combination of factors including inclement weather conditions, plant diseases and sluggish modernization of plantation techniques and equipment. At the same time, despite rising plantation area and an associated rise in the number of coffee holdings, the sector is dominated by small land owners (holdings not exceeding 10 hectares) totaling 288,260, compared to 2,658 large plantations. Fragmentation of coffee production means that small plantation holders generally have less available resources for coping with contingencies and for improving crop quality. Coffee is a major export commodity for India; reduced production and yield do not bode well for the country. Coffee exports declined to USD764.6 million during fiscal year 2014 from USD855.5 million during the previous fiscal year largely due to declining coffee prices, which fell to USD2,564/ton from USD2,858/ton between the two periods. Quantity-wise, the decline in coffee exports was marginal, shrinking by just 0.38% to 298,152 tons. The decline in coffee exports was further exacerbated by the depreciation of the Indian rupee (INR). Indeed, in INR terms, coffee exports declined by just 0.4%. Weaker global demand and intense competition from other producers, particularly Brazil and Vietnam, has placed further pressure on India’s coffee exports. Overall, however, realized coffee exports have thus far achieved the targets set by the Coffee Board (representing the government) for four consecutive fiscal years. The bulk of India’s coffee exports (85.4% of export value as of the fiscal year ended March 2014) comprise Robusta cherries, instant coffee and the coffee plant. Key coffee export destinations for India include Italy, Germany, Belgium, Russia and Turkey; as of the 2014 fiscal year, these countries comprise 50.2% of India’s total coffee export value. Given that the majority of India’s coffee production is exported, it is a good source of foreign exchange reserves for India. While the sector has achieved its export targets, it may require a structural upgrade in light of the lower global demand, stiff competition and poor yields. Aside from market-related factors, much of the poor yield is attributed to lower productivity from poor agricultural techniques, slow adoption of technological improvements and management of pests and plant diseases. Given that small landholders are in the majority, these landholders may lack the means and capital for implementing improvements to cultivation techniques or indeed, the capacity to absorb risks. Hence an industry wide restructure might be needed to revive the Indian coffee sector. By Ian Lim - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
17th November 2014 Weak Production and Prices Drive Down Coffee Exports

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