Indian coffee gains from surging trend in global prices, outlook seen bright
The Indian coffee sector benefitted to a great extent from the surging trend in global prices during 2024, which was largely driven by the tight supplies from large producers such as Brazil and Vietnam among others, where erratic climate impacted the output. The buoyancy trend is seen continuing into the new year with prices expected to remain firm in the medium till the supplies normalise.
It’s not just the increase in prices, but also the Indian coffee exports also gained during as the European buyers frontloaded their purchases during the year ahead of the implementation of the European Union Deforestation Regulations (EUDR) norms, which has now been deferred.
Farmgate prices registered an increase of 40-60 per cent, depending on the grades, during the year on surging global trend. Arabica parchment prices, which ruled at around ₹14,000 levels at the beginning of the year for a 50-kg bag, are now hovering around ₹21,750-22,600 levels, while the Arabica cherry prices are ruling at ₹11,500-12,000 levels (₹7,700-7,900 at the beginning of the year).
Climate change impact
Robusta parchment prices are currently hovering around ₹19,000-19,300 levels compared with ₹10,800-11,000 levels at the beginning of the year, while robusta cherry, the widely produced variety in the country are ruling at ₹10,900-11,100 levels compared with ₹6,700-7,900 levels.
“Exports will cross a record 4-lakh-tonne-mark for calendar year,” said Ramesh Rajah, President, Coffee Exporters Association. During calendar 2023, the Indian coffee exports stood at over 3.76 lakh tonnes. Despite advanced buying during the year ahead of the proposed rollout of EUDR, there exists demand, Rajah said.
Adverse climatic patterns continue to influence production in the key regions of Karnataka and Kerala. Indian production for 2024-25 is provisionally estimated at 3.63 lakh tonnes (lt) against 3.60 lt during 2023-24. However, the severe drought during April followed by excessive rains is feared to have affected the crop prospects and there could be a downward revision in the crop figures when the final estimates are made, growers said.
Sahadev Balakrishna, Chairman, UPASI Coffee Committee, said bullishness in prices was expected given the production challenges in the major coffee growing origins. India, being a price-taker given its low share in global production (3.8 per cent) and exports (5 per cent), the price increase was primarily driven by a global supply shortage, exacerbated by adverse weather conditions in traditional coffee-producing powerhouses like Brazil, Vietnam, Columbia and Indonesia, which together account for nearly 69 per cent of the production.
Rising input costs
“The impact of price rise for Indian coffee growers has to be seen in a relative context of competitiveness of various growing origins. India’s yield level is about 772 kg/ha, compared to Vietnam (2,979 kg/ha) and Brazil (1,694 kg/ha). Further, the input costs (labour, fertilizer, fuel, etc) have gone up substantially and as such, the temporary rise in prices gets nullified to a great extent. Here, it is underscored that higher prices do not mean higher profits, as the input costs needs to be factored in. Importantly, India produces sustainable coffee as it is shade grown, but unfortunately there is no premium for the sustainability efforts. This calls for concerted efforts in promotion of Indian coffee highlighting its quality, origin, characteristics for getting better premium in the export markets,” said Ajoy Thipaiah, Vice-President, UPASI.
“The Indian Coffee being a principal export product, any futuristic outlook is dependent on international supply and demand situation. Given the global supply challenges arising out of climatic factors are positive for better prices in the medium term,” said Balakrishna.
On the domestic consumption side, the demand continues to be strong. “We observed a change in the coffee consumption patterns which can be understood by dividing markets into mature or evolved and emerging markets. The specialty coffee trend has gained remarkable traction, signalling a growing appreciation for premium brews and a diversification of consumer palates. A significant observation has been the role of younger generations, particularly Gen Z, in driving out-of-home coffee consumption. The rise of café culture, fueled by their preference for experiential dining and social engagement, has reshaped urban and semi-urban coffee landscapes, making coffee a lifestyle choice beyond just a beverage,” said Praveen Jaipuria, CEO, CCL Products (India) Ltd.
“Looking ahead to 2025, we anticipate a year of innovation and adaptation. Sustainability will take center stage as the industry navigates stricter environmental mandates and embraces eco-friendly practices. Domestically, the growing popularity of premium coffee and initiatives to boost in-home consumption present promising opportunities. At the same time, fostering resilience through technological advancements in cultivation and exploring new export avenues will be crucial,” Jaipuria said.