In stressful times such as these, a cup of coffee can go a long way to soothe frayed nerves. The decline in coffee prices, however, will not calm coffee growers.

In August, the price of Robusta coffee fell 4.3%, while that of the Arabica variety was down by 1.9%. Since January, these respective varieties have seen a decline of 5% and 19.1%, based on average price data sourced from the International Coffee Organization.

Global coffee prices fell in 2012, too, but there was a difference: the Robusta variety held up quite well. That was good news for domestic coffee growers, as Robusta comprises two-thirds of the country’s output. The decline in price of this variety is still relatively low compared with that faced by Arabica, as of now. Also, a fair share of the decline in Robusta price has been since June, as most commodities declined after the US Fed announced plans to taper its bond-buying programme.

True, the depreciation of emerging market currencies, including the Indian rupee, versus the dollar should be good news for exporters. But that can have unintended consequences, too. One reason why the price of Arabica has fallen, apparently, is that Brazilian sellers sold higher quantities to benefit from the real’s depreciation against the dollar.

In the longer run, the bigger worry for the Robusta market could be a surge in output. India’s own coffee output is expected to rise by 9.1% in the 2013-14 coffee marketing year (beginning 1 October) compared with a 1.3% increase in the previous year. The Robusta output is expected to rise by 7.5% and the Arabica variety is expected to see a much higher increase of 12.6%.

These are the pre-blossom estimates. Post-monsoon estimates will move closer to the final figure. A good monsoon is the main reason for growth in output. But the monsoon is expected to result in higher output in another major Robusta-growing country—Vietnam. A recent Bloomberg report said Vietnam’s 2013-14 coffee harvest may rise by 17% to 1.7 million tonnes. Indonesia, however, has seen its deliveries decline as monsoon has affected the processing of beans, Bloomberg said.

The next few months should give a better picture of the cumulative impact of these developments on the Robusta coffee market. If the price continues to decline, it could negate the impact of a falling rupee to that extent. Another worry could be the impact of slowing economic growth on coffee consumption. As things stand, volatile times are ahead for the coffee market.

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