Coffee set to cool on weak export

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India’s coffee prices, which rose nearly 35% in the first half of 2008, are likely to plateau in the second half on slackening export demand and easing freight rates, industry officials said on Wednesday.

Arabica exports are expected to decline sharply because of lack of good quality produce, said Milan Shah, CEO and MD of Jayanti group, which owns General Commodities, the country’s largest coffee exporter. “So far exports are higher than last year due to good demand from European countries, but there’s very little coffee left to be sold,” he said.

The country’s coffee exports rose a modest 3.1% in the first six months of 2008 to 1,32,846 tonne. Total exports in 2008 is likely to be same as last year’s 2,23,565 tonne, he said.

Peak arabica harvesting starts in December and ends in February, while robusta arrivals start in February and continue through April. Robusta prices have moved up by 30-35% and arabica prices rose by 15%in January-June period, according to Coffee Board.

Robusta constitutes about 65% of India’s total output. Arabica coffee is mainly used in premium coffees, while robusta is typically blended with arabica beans for a lower-cost option for brewed coffee, or processed into instant coffee.

Higher crop is Brazil, the world’s largest producer and exporter, is also likely to keep prices under pressure, said M P Devaiah, general manager, Allanasons Ltd.

The Arabica harvest in Brazil is gathering pace after a delay of several weeks this season because of a dry spell last year that delayed flowering.

In its revised 2008-09 forecast on May 8, Brazil estimated the new crop at 45.5 million 60-kg bags.