Mumbai: India’s coffee prices, which rose nearly 35% in the first six months of 2008, are likely to plateau in the second half on slackening export demand and easing freight rates, industry officials said on Wednesday.
Exports of arabica variety are expected to decline sharply because of lack of good quality produce, said Milan Shah, chief executive and managing director of Jayanti Group, which owns General Commodities Ltd, the country’s largest coffee exporter.
“So far exports are higher than last year due to good demand from European countries, but there’s very little coffee left to be sold,” he said.
The country’s coffee exports rose a modest 3.1% in the first six months of 2008 to 132,846 tonnes. Total exports in 2008 are likely to be same as last year’s 223,565 tonnes, he said.
In India, peak arabica harvesting starts in December and ends in February.
Robusta prices have moved up in the country by 30-35% and arabica prices rose by 15% in the January-June period, according to data with the Coffee Board, the government’s trade promotion body.
Robusta constitutes about 65% of India’s total output. Arabica coffee is mainly used in premium coffees, while robusta is typically blended with arabica beans for a lower-cost option for brewed coffee, or processed into instant coffee.
Higher crop in Brazil, the world’s largest producer and exporter, is also likely to keep prices under pressure, said M.P. Devaiah, general manager, Allanasons Ltd, a coffee exporter. The Arabica harvest in Brazil is gathering pace after a delay of several weeks this season because of a dry spell last year that delayed flowering.
In its revised 2008-09 (July-June) forecast on 8 May, Brazil estimated the new crop at 45.5 million 60kg bags, higher than its January estimate of 41.3-44.2 million bags.
Freight rates are also seen settling down due to falling oil prices, which is likely to bring down coffee prices, said Ramesh Rajah, president, Coffee Exporters Association of India. Oil prices fell for the second session on Wednesday, extending losses from a record high this month.