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Tuesday, Nov 04, 2008
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State coffee growers in deep crisis as prices crash

V. Sridhar

Nearly 70 per cent of the output is exported

Bangalore: Karnataka’s coffee economy – which produces close to three-quarters of all coffee in India – is on the verge of a major crisis. Coffee prices in the international market have tumbled in the last few weeks, triggered by the global meltdown. Prices of Robusta coffee have fallen by almost 40 per cent and those of Arabica by about 20 per cent in the last eight weeks.

The situation is particularly grim for growers in Karnataka. Nearly 70,000 growers – of whom three-fourth are small growers – are facing a crisis because of falling prices in the international market. The Indian coffee economy’s heavy dependence on exports – nearly 70 per cent of the output is exported – threatens to place jobs in plantations at risk.

Shaji Philip, chairman of the Coffee Committee, United Planters’ Association of South India (UPASI), said the severe recession in the industrialised world had resulted in prices crashing in the international market. Prices of Robusta coffee had fallen from U.S. $2,600 a tonne to U.S. $1,570 a tonne in the last two months, he said. The prices of Arabica coffee have fallen from U.S. $1.50 a pound to U.S. $1.10 during the same period.

However, he said the depreciation of the rupee vis-À-vis the dollar in recent weeks had softened the impact to some extent.

P.V. Lokesh, president of the Small Growers’ Association, based in Chikmagalur, told The Hindu that about one-third of the workforce of 2.6 lakh people in coffee plantations in the State were daily wage earners. “The crisis has not hit jobs as yet, but it cannot be ruled out if prices go down further.”

Untimely rain

The crisis is not entirely about falling prices. C.M. Pemmiah, chairman, Karnataka Planters’ Association (KPA), said untimely rain early this year and at the end of the monsoon, coupled with extended periods of drought-like conditions, had seriously harmed coffee crop.

A grower from Coorg, N. Bose Mandanna, said the prices of Robusta coffee were expected to fall to about U.S. $1,400 a tonne, before stabilising.

He said: “Usually, by October, our order books for Arabica coffee would have been full. This year, there are only enquiries, no orders.” Mr. Pemmiah said the entry of substantial volumes of coffee from good harvests in Brazil and Vietnam has dampened prices.

However, Mr. Philip pointed out that end-October stocks of coffee with the global roasters were not very high.

He said stocks of Robusta coffee would last only 19 weeks while those of Arabica coffee would last only 10 weeks. “The orders may be delayed, but they will materialise,” he said.

Although the latest estimates of the crop by the Coffee Board indicate that output will increase by nearly 12 per cent – when compared to last year’s post-monsoon estimate – senior KPA officials said yields were likely to drop at least 10 per cent during the current season (the coffee growing season is from October to September).

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