Coffee growers face price shock as demand dips in Europe

India’s coffee growers are facing fresh trouble over falling prices – both in the international markets as well as at farm gates – as demand for the beans has significantly dropped in major consuming countries in Europe due to the second Covid-induced lockdown.

Cafes and restaurants in Europe, which are major consumers of Indian coffee, have been shut for the second time due to the lockdown. As roasters in Italy and Spain are preferring cheaper coffees from Uganda and Vietnam, the demand for higher-priced, high-quality Indian coffees has significantly dropped, Shirish Vijayendra, chairman, Karnataka Planters Association (KPA), told DH.

The ICO Composite Indicator prices declined 11.6% to 103.78 cents per pound earlier this week compared to a high of 117.37 cents in December 2019.

Similarly, at the farm gate level, the prices of Arabica parchment declined by 13% to Rs 9,600 a bag (50 kgs) from Rs 11,000 per bag a year ago. The prices of Robusta parchment have dropped 20% to Rs 5,600 a bag as against Rs 7,000 a year ago.

"The strong rupee and surplus production in the world market have led to low prices which remain below the long-term average of 135.34 US cents/pound between 2007 and 2018. Coffee prices averaged 107.25 cents per pound in the coffee year 2019-20 compared to average prices of 135.34 cents from 2007 to 2018," Vijayendra said.

Italy and Spain consume coffee mostly in cafes and restaurants during office breaks. Now, due to social distancing, they are shut, thereby impacting Indian exports, he said.

"Coffee growers in Karnataka are already in deep trouble due to crop damage from heavy rain and landslides for the last three years. Now, the fall in prices has put them in deeper trouble. They are not even recovering their production cost," Vijayendra said.