The fall in coffee prices in 2013 has taken a turn for the worse. Fears of a surplus situation because of a higher-than-expected output in the 2013-14 crop year has spooked markets. Earlier, Indian growers may not have been as worried, as the cheaper Robusta variety was holding up, relative to the more expensive Arabica. The Robusta variety accounts for nearly two-thirds of India’s coffee output.

But Robusta prices have not held up. Since March, after touching the year’s high, Robusta has declined by 27.2% in comparison to a 23.7% decline in Arabica, according to the International Coffee Organization.

Robusta’s average November price is at a level last seen in 2010. That is bad news for Indian growers, as domestic output is expected to rise by 9.1% in 2013-14, according to the Coffee Board of India. The largest Robusta grower Vietnam’s crop is expected to rise by 13%, according to Bloomberg.

Coffee blenders and instant coffee makers such as Nestlé India Ltd and Hindustan Unilever Ltd should benefit from falling prices. Inflation has been eating into consumer budgets and lower commodity prices give them the flexibility to use the savings to spur consumption through freebies or price cuts. That is the silver lining for the sector.

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