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Indian coffee crop slumps in the midst of global boom

BS Bureau in Bangalore

Domestic coffee production is set to decline 6 per cent to 280,000 tons during 2002-03 because of weather-related factors and low prices.

Coffee Board chairperson Lakshmi Venkatachalam told a conference of planters on Monday that downward revision of domestic output will further reduce exports to 220,000 tons.

Global production in contrast is expected to reach an all-time high of between 119 million bags - 122 million bags (of 60 kgs each), during 2002-03 largely boosted by a bumper Brazilian crop.

Venkatachalam told a conference organised by Karnataka Planters' Association and United Planters Association of Southern India that domestic coffee production in 2001-02 was 306,000 tons which was the same as previous year's while exports was at 213,000 tons, which was 13.5 per cent less than 2000-01.

Upasi represents around 1.2 million planters in south India who grow cash crops like coffee, tea, rubber, pepper and cardamom.

KPA represents the growers in the state which produces nearly 70 per cent of the Indian coffee crop.

"Coffee year 2001-02 will go down as the darkest period in annals of coffee history," Venkatachalam who heads the state-run board under the Union commerce ministry said.

She said prices in the domestic market have followed the international market trend.

Average auction prices for arabica dropped 57 per cent to around Rs 56 per kg during 2002 compared with 1997 when it reached a high of around Rs 129 per kg.

Robusta prices too fell 73 per cent to Rs 26 per kg during 2002 compared with Rs 95 per kg during 1997.

India produces about 60 per cent robusta coffee and 40 per cent arabica. Robusta is a bitter-tasting variety typically used to make instant coffee while Arabica is sweeter. India exports 90 per cent of its coffee production but accounts for a mere 4 per cent of global production.

Venkatachalam said global production boosted by a bumper crop in Brazil is estimated to hit an all time high of 119 million bags to 122 million bags during 2002-03 while consumption is expected to remain the same as of last year at around 108 million bags.

Last year, the global glut was triggered by Vietnam which tripled output in the last five years to around 12 million bags to overtake Colombia as the second largest producer, forcing prices to 30-year lows.

Venkatachalam said producers and traders expect prices to recover during 2000-04 largely because world's leading coffee producing nation, Brazil will have an off-season during that year leading to fall in production.

She said while world consumption during 2003-04 will be around 111 million bags, global production will be around 109 million bags leaving a deficit of around 2 million bags. The deficit could be more if the global production falls further.

... risk management scheme with Canara Bank

Coffee Board chairperson Lakshmi Venkatachalam said the board along with Canara Bank is working out new risk management mechanism in the form of put options which would be market based to cater to the needs of individual growers.

She said technical assistance would be sought from the World Bank in this regard. Venkatachalam said a long term measure to make India more competitive has been put forward in the Tenth Plan.

Based on the McKinsey report, the plan addresses the need to tackle growing costs through improvement in productivity, incentives to shift to Arabica and improving consistency of quality of exports.

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