Indian shippers stare at threat of losing market share in northern Europe
Bengaluru, May 14:
Pricey Indian Arabicas are staring at the risk of losing market share in key consuming countries such as Germany, Switzerland and Benelux as roasters have started switching over to Colombian varieties. Indian arabicas are currently commanding a record premium of 70 cents per pound (lb) over the New York terminal price, while the premium for Colombian coffee is hovering around 10 cents/lb.
Trade sources attribute the high premium to a lower crop and also to the demand triggered from a section of exporters, who are short of washed arabicas. Also, the fact that a section of medium and large growers are unwilling to sell their produce anticipating higher prices is aiding the trend.
While the prices of arabicas on the New York terminal have dropped by about 40 per cent since October last year till now, local prices have not kept pace with the global decline. New York prices, which ruled at a high of around 227 cents per pound in October last year, are now hovering around 135 cents per pound. Similarly, the farm-gate price of arabica parchment, which ruled at around Rs. 12,500 per 50-kg bag is now hovering between Rs. 9,800 and Rs. 10,200, down 18-21 per cent.
“There is no way the high premium on Indian coffee can be justified. Our customers are switching over to the relatively cheaper Colombian milds,” said an official heading the exports division at multinational firm in Bengaluru. The firm sources coffee for the European roasters.
“Most big roasters from Northern Europe have stopped buying and are shifting to other cheaper origins. This has dented the demand mainly from Germany, Switzerland, Benelux and Scandinavian countries,” said Ramesh Rajah, President of Coffee Exporters Association. Europe accounts for close to half of India’s annual coffee shipments.
The trend is reflected in lower shipments, so far, in the current calendar year. Arabica parchment shipments are down by 40 per cent at 18,328 tonnes during the January 1-May 13 period against 30,654 tonnes in the corresponding a year ago. Similarly, arabica cherry shipments are down 25 per cent (see table). The increase in robusta shipments and surge in imports for re-exports has minimised the impact on overall shipments, down 7 per cent for the period.
Rajah said even the growth in robusta shipments was not as per expectations, whereas re-exports were likely to increase this year. “When domestic prices are high, it is attractive to import for re-exports,” he said. Though some demand exists from traditional buyers for arabica in West Asia at these prices, they won’t be able to pick up the entire volume. Also, there’s some buying in small volumes from Italy, he said.
Trade sources said about 60-70 per cent of the Indian Arabicas has already been traded and most of the shipments were likely to be completed before the monsoon begins.
The timely arrival of pre-monsoon showers in the coffee growing regions has brightened the prospects for the 2015-16 crop starting October. “We expect Arabica output to be 20 per cent higher for 2015-16 over this season,” said Rajah.
For the current season, the Coffee Board – in its post-monsoon estimates – has pegged crop size at 3.31 lakh tonnes, some 8.7 per cent higher than last year’s final estimate of 3.04 lakh tonnes. Arabica output is pegged at 99,600 tonnes, while Robusta at 2.31 lakh tonnes.