Coffee Exports From India Dropping as Rains Shrink Harvest

Apr 04, 2014 5:16 am ET

(Updates prices in fifth paragraph.)

April 4 (Bloomberg) -- Coffee shipments from India, Asia’s third-largest grower, are poised to fall this year as a rally in global prices deters buyers from Italy to Russia and after unseasonal rains cut output for the first time in six years.

Exports may decline as much as 10 percent from 312,756 metric tons in 2013, said Ramesh Rajah, president of the Coffee Exporters Association of India. The harvest probably dropped below 300,000 tons in the 12 months started Oct. 1 from a record 318,200 tons a year earlier, he said.

Reduced supplies from India, where robusta accounts for 70 percent of output, may help a surge in prices of the beans used by Nestle SA in instant drinks. Futures of the arabica variety, brewed by specialty companies including Starbucks Corp., advanced in New York to a two-year high in March and robusta in London jumped 22 percent this year as drought threatened crops in Brazil, the largest producer and exporter.

“It has been an exceptionally bad year for production in India because of adverse weather last year and the weather has been a bit dry this year, which is worrying for the next season,” Rajah said by phone from the southern Indian city of Bengaluru. “Global prices have moved up and this has reduced demand. Export volumes will go down this year.”

Robusta jumped as much as 2.8 percent to $2,070 a ton on NYSE Liffe today and was at $2,051 by 2:41 p.m. in Mumbai. Arabica rose 0.9 percent to $1.761 a pound on ICE Futures U.S. after reaching a two-year high of $2.0975 in March.

Brazil Drought

“Drought in January and February has hurt the Brazilian crop and prices should be sustained at these levels in the medium term,” Rajah said. Production is estimated at 47 million bags to 49 million bags this year compared with 49.8 million bags last year, according to Brazil-based trader Comexim Ltda. A bag is equal to 60 kilograms or 132 pounds.

The state-run Coffee Board cut its crop estimate for 2013-2014 to 311,500 tons in January from a record 347,000 tons predicted at the start of the season, citing heavy rains in the Karnataka region, which represents about 70 percent of output.

Exports rose 2.4 percent to 99,896 tons in the first three months of 2014 from a year earlier, less than the 15 percent increase in the first two months, according to the board. Shipments included 44,329 tons of robusta, 29,363 tons of arabica and 26,123 tons of instant coffee, board data showed. Italy, Russia and Germany accounted for about 40 percent of total shipments last year, board data showed.

“Growers are holding onto their stocks expecting prices to rise further,” Anil Kumar Bhandari, a member of the board, said by phone from Bengaluru. “We should be able to export whatever surplus we have.”