Coffee growers face bleak future as prices fall

Storm in the coffee cup

With a huge drop in prices, the growers are not able to even recover their cost of production. The cost of inputs like fertilisers, pesticides, chemicals, labour wages, social and statutory benefits, power and other plantation inputs have short up over the last few years. Representative Image/Pixabay

India’s coffee growers seem to be facing a bleak future with a fall in global prices and lesser crop to export this year. The volume of the domestic crop this year is seen lower than last year owing to heavy rainfall, floods and landslides that damaged the crop during monsoon.

The prices of coffee –Arabica and Robusta – have declined close to 19% ahead of the start of the bean picking season for the new coffee year (October 2019-September 2020). Bean picking has commenced in some estates across Karnataka.

The farmgate prices of Robusta Cherry have come down by 18.7% at Rs 3,250 per bag of 50 kg compared to Rs 4,000 per bag a year ago. The prices of Arabica parchment, the premium coffee variety, have declined by 10% to Rs 7,600 per bag as against Rs 8,500 per bag a year ago. The coffee picking is set to begin during the first week of December.

“We expect this year’s crop size at 310,000 tonnes, 1.9% lower over the last year’s final estimate of 316,000 tonnes. Robusta production is expected to be around 230,000 tonnes and Arabica output will be around 80,000 tonnes,” said Ramesh Rajah, President, Coffee Exporters Association.

Coffee prices fell in the international market on account of a surplus crop globally with Brazil coming out with a higher crop for the second consecutive year. The supply is higher than the demand that led to a crash in the prices. World production in coffee year 2018-19 is estimated at 169 million bags, which is 5.4% higher than in 2017-18.

“There is an estimate that Brazil will see 5-10% lower crop next year. However, it is too early to make any projections on the prices next year. For the current season, we are witnessing a fall in the prices,” Rajah said.

Another major problem faced by the exporters is unpaid export subsidy. “The Central government has not paid 5% export subsidy since August this year. In addition to this, the government is planning to phase out the subsidy soon and that will make things very bleak for growers and exporters,” he added.

The Coffee Board of India’s post-monsoon estimates have pegged the current year output at 319,500 tonnes. In fact, the Karnataka Planters Association (KPA) estimates show that the production will be lower by 30% in general and 45% in Kodagu during 2018-19.

“Unprecedented heavy rains, floods and landslides during the monsoon season for the last two years has severely damaged coffee plantations in Karnataka and Kerala. The growers have lost around 620 hectares of plantations due to landslides with Chikkamagaluru and Kodagu witnessing major losses this year,” Shirish Vijayendra, Chairman, KPA told DH.

Quoting a survey conducted by Commerce Ministry, he said an estimated 2,26,200 hectares of the coffee growing area has witnessed 33% drop in the crop yield this year.

The prices of all varieties of coffee have crashed to their lowest levels since 2006 due to surplus production globally for the second consecutive year.

Rising production costs

With a huge drop in prices, the growers are not able to even recover their cost of production. The cost of inputs like fertilisers, pesticides, chemicals, labour wages, social and statutory benefits, power and other plantation inputs have short up over the last few years. The cost of production of coffee per acre is going up every year by 10% to 15%. The present cost of production is about Rs 80,000 per acre per year for Arabica and Rs 65,000 per acre per year for Robusta.

Labour wages constitute 60-70% of the total cost of expenditure. In addition to the statutory and social benefits like EPF and gratuity, the plantation industry is saddled with the extra responsibility of providing free medical, housing, drinking water supply, and sanitation among others.

The productivity per acre is also low compared to other coffee producing countries due to non-availability of high yielding saplings, disease and lack of drought-resistant varieties.

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