Coffee Farmers Have Not Benefited from Rising Coffee Prices

According to an October 30 report by The Hindu, India's influential English-language daily newspaper, the gap between the international market price for Robusta and India's domestic market price has become a major concern for Indian coffee growers.

Although Indian coffee prices are usually based on international market prices, especially London market prices, the corresponding rise in overseas product prices has not yet been reflected in the local Indian market.

Robusta coffee prices rose by about 70 USD/tonne on the international market, but the Indian market has not yet reflected this increase. According to data from the Coffee Board, on October 29, the price of Robusta (AB grade) on the international market was 165 GBP/kg, but growers here received only 140 GBP/kg.

Relevant trade sources believe that the possible reason for this discrepancy is a "price cartel" among some international buyers. In addition, they added, the number of buyers in India is relatively low because the harvest season here does not begin until the end of December.

According to the Coffee Board's final estimate, India's total coffee production in 2020-2021 was 36,900 tonnes, of which Robusta accounted for 235,000 tonnes. More than 164,000 tonnes of coffee beans will be exported.

Recently, the relevant authorities extended the RoDTEP (Refund of Duties and Taxes on Exported Products) scheme to the coffee industry in order to boost coffee exports, but coffee growers have shown little interest. Some international buyers may try to increase profits by not raising prices, and they are seeking intervention from the EU commerce department to stop this exploitation.

Excessive rainfall in India may affect coffee yield and quality

According to a November 9 report by TheHinduBusinessLine, Karnataka's main coffee-growing areas account for about 70% of India's total production. After the arrival of the Indian Ocean monsoon, India's coffee-growing regions are expecting a harvest, but rainfall there has been excessive.

After the monsoon, from October 1 to November 8, rainfall increased by 84% in Chikkamagaluru, 57% in Hassan, and 81% in Kodagu.

However, all three coffee-growing regions in Karnataka recorded insufficient rainfall during this year's Indian Ocean monsoon season, with Chikkamagaluru down 18%, Hassan down 16% and Kodagu down 23%.

Green arabica coffee beans in parchment have hovered around 13,000 pounds per 50 kg bag this year, up from the 10,000 to 10,500 pounds level a year earlier. Likewise, the price of arabica coffee cherries is also around 5,400 to 5,600 rupees per bag, compared with 3,575 to 3,750 rupees a year ago.

Jeffrey Rebello, vice chairman of the United Planters' Association of Southern India (UPASI), said prices are better than last year, but it is still early days. The damage to crops from rain is not yet clear. In addition, cultivation costs, including labor wages and inputs such as fuel, have already risen, which may offset the gains.

Due to climate change, coffee cherries ripen unevenly, and labor costs rise accordingly. Although arabica prices have risen sharply, robusta prices have risen slowly.