Report Highlights:
MY 2004/05 coffee production is forecast to increase by 12 percent to 4.8 million bags (290,000 metric tons) in response to excellent rainfall distribution in growing regions. Exports are forecast to increase to 220,000 metric tons from 195,000 tons in MY 2003/04. The Coffee Board is working on strategies to protect small growers from price and climatic risks.
SECTION I – SITUATION AND OUTLOOK
PRODUCTION
MY 2004/05 (Oct-Sep) coffee production is forecast at 290,000 tons (4.8 million bags of 60 kilogram), 12 percent higher than the revised MY 2003/04 estimate of 260,000 tons (4.3 million bags).Higher yields resulting from excellent pre-blossom showers and copious back up rains are likely to more than offset the negative impact of last year’s drought and poor management practices adopted by farmers in response to lower prices.The 2004/05 production is likely to consist of 105,000 tons of Arabica and 185,000 tons of Robusta compared with 100,000 tons of Arabica and 160,000 tons of Robusta in 2003/04.Although not supported by statistical data, a shift in area from coffee to other crops like vanilla, spices and oranges is reportedly taking place in coffee plantations, as diversification is a risk management strategy typically adopted by most Indian coffee growers.Due to growing domestic and export demand, production of instant coffee is increasing, and capacity is expanding.
India’s coffee area and production registered an overall significant growth in the past.The area under coffee increased from 220,000 hectares in the early nineties to 320,000 hectares in recent years, with the Robusta area registering a faster growth compared with Arabica.While Arabica yield remained relatively stable, the Robusta yield grew steadily reaching around 1100 kilograms per hectare in recent years, almost 30 percent higher than the Arabica yield.Consequently, Robusta production now accounts for more than 60 percent of the total coffee production. Although the Coffee Board is advocating a shift from Robusta to Arabica based on recommendations by a consultant’s study, industry sources consider a large shift infeasible.Furthermore, a lower return from coffee is prompting framers to neglect Arabica, which cost more to produce.
Although coffee production is undertaken in 17 states, production is mostly concentrated in the southern states of Karnataka, Kerala, and Tamil Nadu.Approximately 5 million people depend on the industry for their livelihoods, including nearly 550,000 directly employed plantation laborers.The total estimated labor requirement for a hectare of yielding plantation of Arabica and Robusta, respectively, are 495 man-days and 330 man-days per year.Both small holders and estates produce coffee, and the wide range of production intensities and yields reflect this.Almost 98 percent of the total 178,300 coffee holdings are less than 10 hectares and accounts for 60 percent of the production, while large-holder estates (over 10 hectares), which accounts for about 30 percent of the total coffee area, account for 40 percent of production.
High 1997 and 1998 coffee prices, along with liberalization of the coffee trade in the mid-nineties, encouraged Indian growers to plough back part of their profits in upgrading plantations, which resulted in a steady growth in production and processing capacity.Prior to liberalization, the scope for achieving significant quality price differentials for growers was lost under the pooling system, since different growers’ coffees were bulked.Since liberalization, the quality of some plantation production has improved significantly as differentials have emerged.India has now entered the arena of “specialty coffees” with special focus on “Estate Branded”, which is said to have unique cup quality characteristics.However, positive quality differentials have been slower to emerge with small growers.