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From the US to Europe, why Indian coffee is suddenly in demand


Brazil’s loss could mean gain for coffee exporters in India. The Latin American country, the world’s top coffee producer, has been expecting a lower crop this season on account of severe frost and drought conditions last year. Brazil’s food supply agency, Conab, had lowered its forecast for the country’s 2022 coffee output. The production is now expected to total 50.38 million bags, down from Conab's May projection of 53.43 million bags (a bag = 60 kg).


Outlook for the second largest producer, Vietnam, also indicates lower production and reduced reserves. The problem is due to a rise in prices of inorganic fertilisers, which led to farmers using organic ones. Industry observers say this will lead to a fall in yield. According to a Bloomberg survey of traders in Vietnam, stockpiles will halve by the end of September from a year ago. Carryover stockpiles were at 200,000 tonnes at the onset of the new season on October 1, compared with approximately 400,000 tonnes a year earlier, the survey stated. It further indicated that output may fall 6% to 1.72 million tonnes in 2022-23.


Does this signal good news for India’s coffee exports despite fears of recession playing out in global markets?


There are reasons to be optimistic. Though coffee prices have come down from the highs seen last year, experts in India say this is still good news as it brings stability for exporters.

SLN Vishwanath, Managing Director of SLN Coffee and Spices, an exporter of coffee based in Kushalnagar, Coorg, says the coffee market has been fluctuating because of the price movement in the international market. “Last year, due to the Brazil frost, coffee prices went up by at least 30%. Prices have now started coming down by close to 15%. We are expecting it to be a better year this year as crop size in India is good and supply will be normal. Last year, we did not take too many contracts because of risks attached to price fluctuation. But this year indicates more stability,” he says.


Reason to cheer

A look at the numbers reflects the positive sentiment. The quantity exported from India in FY22 was approximately 41,3941 tonnes, versus 31,0647 tonnes in FY21, according to the Coffee Board of India. DR Babu Reddy, Deputy Director (Research)-Market Intelligence Unit, Coffee Board of India, says while last year was a record year for exports because of favourable market conditions, the momentum is continuing this time too. “Coffee prices were increasing month-on-month in the last financial year. This has encouraged growers to release more to the market for higher returns. This time, though the increase of exports has been lower in April-October, exports are still doing well,” he says.


Such views from experts have raised hopes that Indian coffee would have a great year. The fact that the prospects of traditional coffee export leaders are under a cloud gives growers in India more reason to cheer. Even the fears of recession in global markets have not pulled down the demand for Indian coffee, says Reddy.


Another reason keeping the hopes of coffee growers up is that prices will rise as the crop gets ready to enter the market.


Dinu Nanjappa, Founder & CEO of Bengaluru-based Planet Coffee, says that owing to the spike in prices in the last 12 months, they made 35-40% more revenue this time around. “When coffee prices go up, it means there is demand. Prices are now on a downward trend for the last few weeks. However, that is a usual phenomenon because in November and December, the arabica season starts and robusta coffee picking season comes up in January and February. When the season is over and new coffee comes to the market, prices go up again,” he says.


Nanjappa expects the global situation to continue for 12-18 months. “Brazilian coffee is still at rock-bottom. The crops are destroyed. There has to be density in coffee. Inside a coffee cherry, there is a coffee bean, and this is not up to the mark in the Brazilian crop. It will take one or two seasons for that to rectify. It is a natural process.”


Brewing it right

Two main varieties of coffee–arabica and robusta–are grown in India, with almost 70% of the production being of robusta coffee. Arabica is mild coffee, the beans are more aromatic and have higher market value versus robusta beans, according to information from the Coffee Board of India. Robusta has more strength and is used in making various blends. According to the Coffee Board, India exported 41,375 tonnes of arabica coffee and 209,563 tonnes of robusta coffee in January-November.


India exports 65-70% of its coffee. In 2021-22, exports saw a 42% rise to $1.04 billion from the previous year. In FY23 (until September 2022), exports stood at $610.23 million, a 32.54% rise over the previous period. This growth in exports has improved realisations for coffee growers in key states such as Karnataka, Kerala and Tamil Nadu.


Italy, India’s largest export market, accounts for 20% of bean coffee exports. Europe, where people prefer robusta blend, makes up 42% of India’s exports.


Nanjappa says the key markets that drive the prices of Indian coffee are American and European. Even here, the Indian subcontinent is largely driven by the European market. The exporter explains that almost 90% of the coffee grown in Coorg is robusta and Indian robusta is known the world over. The reasons for this include the diverse environment in which the coffee is grown. “For example, in Brazil, they grow coffee on plain ground and in the sun. In India, it is done in the shade and as part of a diverse estate where you would also have products such as pepper, orange and cardamom. Because of the flora and fauna, caffeine content remains intact all through the season and that is why buyers are willing to pay a premium for Indian robusta,” he says. This raises the profile of Indian coffee.


Read More at https://economictimes.indiatimes.com/small-biz/trade/exports/insights/from-the-us-to-europe-why-indian-coffee-is-suddenly-in-demand/articleshow/95902217.cms

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