Europe slowdown may hit coffee exports .

The impact of Europe's economic crisis on India's coffee exports has started to show, in the form of weak demand for the robusta parchment variety. Major exporters have expressed concern that despite the spurt in robusta and arabica prices on the London and New York coffee exchanges over the last month, sales have not picked up to the anticipated level.

India produces 15,000-20,000 tonnes of robusta parchment, all of which is exported. While the latest crop was expected to be above 25,000 tonnes, growers said there were feeble inquiries for the same. The debt-hit countries — Greece, Italy, Spain and Portugal — account for 34 per cent of India's coffee exports.

Mr M.G. Medappa, General Manager, Balanoor Plantations and Industries, an exporter of premium coffee varieties to Europe, said: “The fact that the rise in international arabica prices is not being reflected in the premium commanded by Indian arabicas is an indication of a problem in Europe. Inquiries from roasters in Europe for Indian coffees have become uncertain. Exporters are forced to work on thin margins. A weaker euro is bound to impact coffee demand.”

Industry sources said that even suppliers to regular customers in Europe are under pressure to reduce their prices. While the New York prices of arabicas went up from about 130 cents/lb to 159 cents/lb in the first fortnight of this month, there was no significant change in domestic prices over this period, a reflection of slack in export demand that, in turn, affected the domestic market. Dealers in Europe who have committed to consignments are finding excuses to back out, they said.

Dr N.K. Pradeep, President, Karnataka Growers' Federation, said: “There is sluggish world demand in April and May, when the coffee in India is shifted to the curing works. The gap between the farm gate price and the international price widens during this period. However, this year, the gap is Rs 10 per kg against the usual Rs 6-8 per kg. Even when the market is bullish, the grower gets 20 per cent of the total value of the produce.”

Price correction

Traders, however, believe that the downward price pressure on Indian varieties in more in the nature of a correction over last year's levels. Mr Suresh Babu of Chaitanya Coffees, a trading concern, said: “Indian planters are holding on to robusta parchment, believing that the present price is too low. Robustas on the London exchange are trading at just over $1,500 a tonne, against $2,200 a tonne a year ago. Further, Indian robustas commanded a premium of $550 last year, which has now fallen to $400-450 a tonne. There is a demand, but not at last year's prices.”

Mr Babu said: “Buyers are ready to buy for December and March shipment but not as yet for July and September shipment.”

Mr Amit Pant, Business Manager, Olam Agro India Ltd, said: “Only if there is an institutional crisis in Europe, causing banks to tighten credit to those who are less credit-worthy, would highly leveraged roasters be in trouble. But at present there are no indications of a hit in demand in Europe.

Interest rates in Europe are low. The high prices are — as is often the case — on account of supply-side factors, such as the shortfall in Columbian milds.”

Over the last three years, with Columbian milds being in short supply, Indian arabicas have been commanding a high premium over the New York exchange price. “Arabica prices are likely to be good, because the next Columbian crop is not due before the end of December. Unfortunately, Indian arabicas, which are similar but not the same, are not in a position to benefit because most of the exports are completed between January and June,” Mr Pant said.

Mr Alfonso Penagos Consuegra of Penagos Hermanos, a producer of coffee-pulping machines, said: “Columbian coffee producers made a wrong forecast. The next crop should be good. The recession in Europe will not have any impact on coffee drinking, as it did not in the US. People can be seen drinking coffee everywhere.”

Soure : The Hindu Business Line