Report Highlights:
MY 2005/06 coffee production and exports are forecast to increase by five percent and 29 percent, respectively. Indian coffee prices increased sharply in recent months, which is likely to retard consumption growth. Indian coffee exports to the United States registered a significant increase in CY 2004.
SECTION I – SITUATION AND OUTLOOK
PRODUCTION
MY 2005/06 (Oct-Sep) coffee production is forecast at 290,000 tons (4.8 million 60-kg bags), five percent higher than the revised MY 2004/05 estimate of 275,500 tons (4.6 million bags).The increase stems from excellent pre-blossom showers in growing areas, the forecast of a normal monsoon by the Indian Meteorological Department, and likely higher input use (fertilizers, pesticides, etc.) and better management practices by growers.However, the white stem borer, a destructive pest, continues to threaten particularly the Arabica plantations.This pest has reportedly affected 2,000 hectares of coffee, is still spreading, and was one of the main reasons for the recent downward revision of the 2004/05 coffee production.
The 2005/06 production is likely to consist of 105,000 tons of Arabica and 185,000 tons of Robusta, compared with 103,400 tons of Arabica and 172,100 tons of Robusta in 2004/05.The recent improvement in coffee prices and a significant fall in vanilla and pepper prices should discourage inter-planting of coffee with these crops, although most Indian coffee farmers continue to use crop diversification as a risk management and coffee quality-improvement strategy.Also, the Land Ceiling Acts in various states do not permit reduction in acreage under coffee.
The instant coffee segment is almost entirely branded and packaged, and is dominated by multinationals like Nestle and Lever.The absence of smaller players is a result of high investments and marketing costs.Due to a growing domestic and export demand, production of instant coffee is increasing and capacity is expanding, with one Indian company, Narasu’s, recently getting into instant coffee production.
Some international coffee chains, including Starbucks, have started sourcing coffee from Indian companies.However, positive quality differentials have been slower to emerge with small growers, who own almost 98 percent of the total 178,300 coffee holdings and 60 percent of the production.