Poor crop, low price to haunt arabica growers

As the harvest of the milder and premium coffee variety, Arabica, begins in Karnataka and Tamil Nadu, growers are facing a double whammy of poor crop and lower prices. The incessant South-West monsoon in August this year impacted the crop in the key producing regions of Kodagu, Chikmagalur and Hassan in Karnataka, which accounts for 70 per cent of India’s coffee crop.

Besides, a bumper harvest in large producing countries such as Brazil, Colombia and Vietnam pushed coffee prices to 12-year lows, influencing the domestic prices here. Farm gate prices for arabica parchment are hovering at ₹6,500-7,000 per 50 kg bag, lower than last year.

“There’s neither crop nor price this year,” said N. Bose Mandanna, a large grower in Suntikoppa, Kodagu. This could mean more trouble for coffee growers, who are already reeling under the impact of higher cost of production due to rising wages and increase in input costs. “Luckily, the rupee has weakened against the dollar due to which we are getting some money. But that’s not enough to cover our costs,” Mandanna adds.

The Coffee Board has pegged the crop loss at 82,000 tonnes for the crop year 2018-19 starting October on account of the incessant South-West monsoon rains that lashed the key growing regions in Karnataka, Kerala and Tamil Nadu during recent months. Production during 2018-19 stood at 3.16 lakh tonnes.

“We are aligned to the Coffee Board’s crop loss estimate of 82,000 tonnes. The picking has just started. We will get a clearer picture on the crop size by middle of December,” said M B Ganapathy, chairman, Karnataka Planters Association.

Further, the KPA chairman said the current coffee prices are not sustainable for the growers as they are below the cost of production, which has been going up. With a glut in the international market, the prices may not see any improvement, going forward, he said.

While the coffee crop size faces an uncertainty on account of weather-related issues, exports have also slowed down on account of the lower crop in the previous year. “We expect that shipments may gain momentum in the first quarter of calendar 2019,” said Ramesh Rajah, President of the Coffee Exporters Association.

However, there may not be a big growth in exports next year as there’s not much inventory left with the growers or trade. Already, Indian coffee exports have slowed down in the current calendar year (see table) owing to lower crop last year. While the green coffee exports have witnessed a decline, the shipments are largely sustained by the re-exports or instant coffees.

“The carry-forward stocks look minimal. We cannot expect a big jump in exports next year. Exports may be on par or could be marginally lower than current year,” Rajah said.

Further, Rajah said the Indian exporters are facing competition from major producers, who are aggressively selling in the international market. “Things don't look bright for the next six months at least,” he added.

Currency advantage blunted

The weakening of the rupee against the dollar has helped the exporters to some extent. However, the currencies of competitors such as Vietnam and Brazil have also weakened against the dollar, helping them to price their coffees attractively. This has blunted the currency advantage for the Indian exporters to an extent, resulting in wafer-thin margins, Rajah said.

Indian exporters typically start booking new contracts with the commencement of the new crop. However, the order books are lean right now, given the uncertainty over the crop size. “We expect the order books to be better in a couple of months once there are better arrivals in December,” Rajah said.

The exporters body sees a 15-20 per cent decline in total coffee output at around 3-3.1 lakh tonnes from the initially estimated 3.6-3.7 lakh tonnes. “We expect the Arabicas to be around 90,000 tonnes and Robustas at around 2,20,000 tonnes.”

Like in Kodagu, the harvest has also started in Chikmagalur. another key region. But the recent rains in parts of Chikmagalur and Sakleshpur, triggered by the effects of cyclone Gaja, are causing concern for the growers.

“We had some rains a couple of days ago, that is seen hurting the quality of the arabicas. Rains at this stage will result in the splitting of the ripened beans and their dropping on to the ground,” said Shirish Vijayendra, a planter in Chikmagalur. Farmers will lose out on account of this due to the loss of quality. However, the recent rains are perceived to be beneficial for the robusta variety and also the pepper vines, he added.

In Tamil Nadu, the harvest has been in full swing in the Shevaroys, a major arabica growing region, while the crop has been impacted by the recent rains in the Palanis and the Anaimalais. “Though the crop is low, the quality seems to be good,” said Vijayan Rajes of MSP Plantations in Yercaud.

At current prices of ₹7,000-7,500 per 50 kg bag of arabicas (roughly ₹150 a kg), growers have been losing money. “We need at least ₹175-180 per kg to cover the cost of production,” Rajes, former UPASI chairman, said.