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Coffee growers to gain more from Brazilian woes

Mar 21, 2014

Coffee growers in the country will continue to reap gains from this year’s Brazilian drought until the third quarter of next year as the South American nation’s crop will take time to recover.
“Brazilian growers say that they faced the worst drought in January-February. Next year’s crop has also been affected due to this,” said Bose Mandanna, a planter from Kodagu and former vice-chairman of Coffee Board.
Brazilian crop
Brazil coffee production this year is likely to be 10 per cent lower than last year’s 49.6 million bags (60-kg each). Some of the Brazilian areas received only 10 per cent of the rainfall they require during the crucial period for the crop development.
“Domestic prices have increased to a three-year high due to Brazilian drought. The crop next year there could be even worse since its growth has been affected,” said Nishant R Gurjer, a grower and a trustee of the Karnataka Planters’ Association.
“This is an ‘on’ year for Brazilian coffee and the crop has been hit. Next year is ‘off’. So, you can imagine the situation,” said Anil K Bhandari, former president of the United Planters’ Association of Southern India.
Coffee is a crop whose production is good one year, called the ‘on’ year, and bad the next, called the ‘off’.
Hot spell
The damage to the current crop in Brazil is irreversible with the coffee growing areas going through one of the hottest periods in recent years.
“The record high temperatures have made the plant suffer so much that the branches cannot yield the next crop,” said Bhandari. The reproductive buds will be stunted due to this, Mandanna said.
Brazil is due to receive the showers only during August-September that will help blossoming of flowers in coffee plants. With a dry period set to follow in April-May, chancesfor crop recoveryare bleak.
“In Brazil, coffee is not grown in shades as in India,” said Mandanna.
Firm prices
Global coffee prices are up over 60 per cent this year. Prices, in fact, have dropped after nearly doubling last week, as speculators booked profits.
Currently, Arabica coffee for delivery in May on ICE US, New York, is quoting at $1.82 a pound. Robusta for the same month is ruling at $2,110 a tonne in London.
“Prices will rule firm because from a surplus of about 3.5 million bags, we will see a deficit of at least four million bags,” said Bhandari.
“Though rains are expected in Brazil this week, there is no clear picture on the exact loss. The outlook will remain bullish,” said Gurjer.
“Any fall in coffee prices could only be a correction. It enjoys a good support at levels of $1.56,” said Mandanna.
“It will be difficult to make up for a bad year when coffee consumption is rising fast. We have to see how the deficit will be made good,” said Bhandari.
Consumption pattern
Coffee consumption is rising rapidly in India at eight per cent annually, while it is increasing 6.5 per cent a year in China. “In the US, coffee consumption is growing two per cent every year,” said Bhandari.
Indian growers have benefited a lot from the Brazilian problem.
“We started the season in November by selling Arabica parchment at Rs. 6,500-6,700 for a 50-kg bag. Now, we are getting Rs. 11,700. Similarly, robusta parchment, sold at Rs. 5,000 a bag at the season’s start, is fetching Rs. 8,000 now,” said Bhandari.
“We are getting Rs. 4,100 for a bag of robusta cherry. We had initially got Rs. 2,800,” said Mandanna.
Growers, however, have been unable to take full advantage because the Brazilian problem cropped up only in February. By that time, 80 per cent of the domestic Arabica crop and 30 per cent of the robusta crop had been sold off, said Mandanna.
Arabica harvest takes place during November-December, while that of robusta is January-March.
Output, exports
Indian growers have been helped by higher production, though growers dispute the Coffee Board’s estimates. For the current season to September, coffee production has been estimated at 3.11 lakh tonnes (lt) against 3.18 lt a year ago.
According to provisional figures, exports since January have increased to 78.819 tonnes from 68.257 tonnes during the same period a year ago.
“Indian growers can expect to get good prices for their crop next season starting October. For the 2015 crop, the price could be at least decent,” Bhandari said.
“Our growers should benefit since the 2014-15 crop looks promising as of now,” said Gurjer. “Our only problem is the rising cost of production, especially on the wage front,” said Mandanna.

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