Global coffee output is expected to increase by 6.3% to 144.4 million bags in the 2012-13 crop year, according to a presentation made by the International Coffee Organization’s (ICO’s) head of operations Mauricio Galindo at a council meeting this week. A bag equals 60kg and the crop year starts in October.

The current estimate marks only a small reduction from the ICO’s earlier forecast of 145 million bags. Hope that an outbreak of leaf rust disease in Mexico and Central America may restrict output has been belied, as countries such as Brazil, Colombia, Indonesia and Ethiopia have compensated with healthy growth rates.

That may not give global coffee plantation companies respite from weak trends in coffee prices in the near future. Their costs have been increasing chiefly due to increase in wages, fuel and operational costs.

The ICO also released its 2011-12 annual review in which it also discusses the shift in consumption towards the Robusta variety, which it expects will continue. It attributes demand a consequence of Robusta being cheaper compared with Arabica, making it an attractive alternative during tough economic times for consumers. The share of Robusta increased to 39.7% in 2011-12 from 37% in the previous year. Its relative popularity has meant its prices did not fall as much as Arabica (see chart).

That has been good news for countries that grow more of Robusta, such as India, where Robusta has a 68% share. But India faces another challenge, that of poor coffee output. Though the Coffee Board of India’s post-blossom estimate pegged India’s coffee output at 325,000 tonnes, the post-monsoon estimate saw this being cut down by 3.01% or only 1.5% higher than the previous year’s post-blossom estimate.

A flat output leaves coffee growers with little leeway to grow revenue and boost profits, unless prices increase. On that front, compared with November and December, global Robusta prices in January and February have increased which is a positive. The ICO attributes this relative buoyancy to the market’s appetite to absorb growing exports of Robusta and expects this trend to continue.

Considering the woes facing predominantly Arabica-growing countries, Indian growers are better off. If the uptrend in Robusta prices continues for some more months, they would be happier.

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