Coffee Exports From India Set to Drop as Europe Demand Slows

Coffee exports from India, Asia’s third-biggest supplier, may decline for a second straight year as an economic slowdown in Europe cuts demand and as damage from pest attacks reduces the harvest.

Shipments may drop below 300,000 metric tons this year from 310,886 tons in 2012, Ramesh Rajah, president of the Coffee Exporters Association of India, said by phone from Bangalore. Exports fell 9.4 percent last year, the first annual drop in three years, according to data from the Coffee Board of India.

A drop in Indian supplies may help limit a 39 percent slump in arabica prices in the past year in New York and cut costs for Starbucks Corp. and Nestle SA. Stockpiles monitored by ICE Futures U.S. reached 2.63 million bags of 60 kilograms each on Feb. 1, the highest since March 2010. Slowdowns in Italy, Russia and Spain, India’s main buyers, curbed demand for the commodity brewed by specialty coffee makers.

“The order book is thinner this year because the economies of the main markets aren’t faring well and buyers are aggressively searching for cheaper coffee,” Rajah said. “Arabica exports from India will be lower as prices have come down sharply and shippers don’t want to sell at these prices.”

The euro-area economy shrank 0.1 percent in the third quarter after a 0.2 percent contraction in the three previous months. Gross domestic product probably fell another 0.4 percent from October to December and will stagnate in the first quarter of 2013, according to a Bloomberg survey. Europe accounted for 38.3 percent of the global green coffee consumption in 2012, according to the U.S. Department of Agriculture.

Pest Attacks

Arabica is grown mainly in Latin America and brewed by specialty companies including Starbucks. Robusta beans, used in instant coffee, are harvested in Asia and parts of Africa. India produces both the varieties.

Arabica for March delivery fell 0.3 percent to $1.4365 a pound in New York at 4:51 p.m. in Mumbai, while robusta for delivery in the same month was little changed at $2,065 a ton in London.

The coffee crop in India may decline this year because of pest attacks caused by dry weather during the flowering period and rains during the harvest, Rajah said. Output may drop to 310,000 tons in the year started Oct. 1 from a record of 314,000 tons a year earlier, he said.

“The weather was very unusual last year,” he said. “Late rains has led to the delay in arrival of the new crop by three- four weeks and the crop is just coming into the market.”

Pest attacks like the white stem borer due to dry weather after blossoming reduced productivity, he said.

India shipped 21,557 tons of coffee in January, comprising of 6,689 tons of arabica, 6,257 tons of robusta beans and 8,611 tons of instant coffee, data from the board showed.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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