The year 2016 has begun on a disappointing note for coffee growers in India as farm gate prices of the beans have declined by 25%, owing to availability of better crop globally. Despite the world’s largest producer Brazil producing a lower crop, other top producers such as Vietnam, Colombia and Indonesia have reported increase in their production.
Farm gate prices of Arabica parchment (washed variety) in Karnataka are ruling at Rs 8,200 per bag (each bag is 50 kg) compared with Rs 11,000 per bag in January 2015. The domestic crop for 2015-16 is estimated to be higher by 7% at 350,000 tonne by the state-owned Coffee Board.
“The growers are upset with the current prices as they can’t even recover their cost of production, which is around Rs 9,000 per bag. A tough year is ahead of growers as prices could go even lower and settle around Rs 7,500 per bag,” Ramesh Rajah, president, Coffee Exporters’ Association, told the FE.
Continuing their downward trend seen in the last 15 months, global coffee prices declined to 114.63 cents per lb in December. The ICO composite indicator prices fell almost 24% compared to December 2014 when the prices stood at 150.66 cents per lb.
The decline in prices is mainly attributed to a recovery in global production in crop year 2015-16 to 143.4 million bags, albeit a marginal 1.4% compared to 2014-15, which has been revised lower to 141.4 million bags, according to data released by International Coffee Organisation. Over the last six months, coffee prices remained in a relatively narrow range between 110 and 130 cents, whereas the first six months of 2015 saw a much greater range of 115 to 155 cents. Rajah said growers may have to make a lot of changes in their farming practice and cut the cost of cultivation.
The Centre should come to the rescue of growers by reintroducing export incentives, he added.
“A majority of plantations in Karnataka have reported fruit dropping in Arabica estates following unseasonal rains in November. We expect Arabica output to drop by at least 20% this year. The Robusta crop is better and the overall crop size could be same as last year’s level of 327,000 tonne,” Baba P S Bedi, chairman, Karnataka Planters’ Association said.