(Updates prices in final paragraph.)
June 17 (Bloomberg) -- Coffee production in India, the third-largest grower in Asia, will probably rebound from the first decline in six years after plentiful rains spurred bean development, an exporters’ group said. Shares of exporters gained in Mumbai, while coffee prices dropped.
The harvest in the 12 months starting Oct. 1 is set to expand from 300,000 metric tons this year, Ramesh Rajah, president of the Coffee Exporters Association, said without providing an estimate. While he expects an increase, the crop still faces the risk of pest attacks and reduced rainfall from a possible El Nino later this year, he said by phone on June 13.
Higher production may boost shipments, expanding global supplies and potentially pressuring prices. Arabica futures in New York entered a bear market this month and have tumbled 20 percent from a two-year high in April after rains eased drought damage for plants in Brazil. Robusta prices in London fell 11 percent from the highest level in 17 months in March.
“The prospects seem much better next year, specially for robusta, because rains have been quite favorable,” Nishant Gurjer, a member and past chairman of the Karnataka Planters Association, said by phone June 12 from Bengaluru, formerly known as Bangalore. The group represents 650 growers from the state, which supplies about 70 percent of the nation’s crop.
Total production may increase by 7 percent from the 280,000 tons that the planters’ association estimates for this year, Gurjer said. The robusta crop, which makes up 70 percent of the total, may expand by 15 percent, he said.
El Nino Concern
Karnataka received 9 percent to 75 percent more rain than the 50-year average from March to May, according to the India Meteorological Department. The monsoon from June to September, which supplies more than 70 percent of annual rainfall, will be below normal at 93 percent of the 50-year average because of the emergence of El Nino, the bureau said.
While Rajah from the exporters’ association said a weak monsoon may hurt the crop, Gurjer of the planters’ group said the absence of heavy rain later in the year may be beneficial.
“If an El Nino does happen and the monsoon isn’t as vigorous as last year, the risk associated with a heavy monsoon reduces,” he said, explaining fewer cherries would be lost.
The state-run Coffee Board cut its output forecast for this year to 311,500 tons in January from 347,000 tons at the start of the season, citing heavy rain in Karnataka in September and October. The board hasn’t updated its estimate. The crop was a record 318,200 tons last year, board data show.
A weak monsoon might increase the incidence of the white stem borer pest in arabica plantations, according to Rajah.
Shares of Tata Coffee Ltd. advanced 1.1 percent to 978.40 rupees in Mumbai trading, while CCL Products Ltd., India’s biggest exporter, climbed 0.7 percent to 63.20 rupees.
Arabica prices may drop by 10 percent to 15 percent in the next couple of months, while robusta may decline 5 percent to 10 percent, Rajah said. “Brazil’s crop should be coming in better than expected and we are heading into the lean demand season as the summer months begin in U.S. and Europe,” he said.
Brazilian growers are facing less severe crop losses than estimated after showers reduced the impact of the worst dry spell in 50 years, Agriculture Minister Neri Geller said on June 2. Output this year may be 50.5 million bags, according to Mercon Group. That’s higher than the 49.5 million estimated by the U.S. government in May.
Shipments from India may fall in the second half because of the smaller crop and weaker prices, Rajah said. Exports in 2014 will drop by 5 percent to 10 percent from 312,756 tons a year earlier, he said, reiterating estimates made in April.
Exports declined to 167,714 tons between Jan. 1 and June 10 from 168,089 tons a year earlier, board data show. Buyers from Italy, Russia and Germany accounted for about 40 percent of exports last year, the data showed.
Robusta declined 1.1 percent to $1,977 a ton on NYSE Liffe, while arabica fell 0.8 percent to $1.7435 a pound on ICE Futures U.S.