Coffee prices soar on global supply worries

COIMBATORE: Retail coffee prices are now ruling at around Rs 300 per kg and are expected to surge by Rs 50 per kg this month because international markets remain buoyant on supply worries. “Prices are at a 13-year high now. The tight demand-supply position in international markets due to adverse weather conditions in Brazil, India and Indonesia are helping the prices,” said a Coffee Board official in Bangalore.

Production has come down in major washed Arabica-producing countries in Central America and Columbia due to changes in weather patterns. These countries contribute 65% of world’s washed Arabica production. “Coffee prices are going beyond the reach of the common man today. People are buying in small quantities to cut cost,” said a senior executive at Coffee Day Fresh ‘n Ground in Tamil Nadu, the largest coffee-consuming state in India.

Institutional buyers are not much worried about the increase in prices because they are concerned more about the soaring vegetable costs. “We use a minimum of 100 kg onions in our kitchen everyday. We are more bothered about the rise in onion prices. At the maximum, we use only 3-4 kg coffee per day. Even though the price increase annoys us, we are ready to forgo the margin,” said Coimbatore’s four-star premium hotel Residency’s executive chef S Ashok Kumar.

CP Chandan, partner at Cotha’s Coffee, one of the market leaders in Karnataka, said institutional buyers who had moved to cheaper beans have returned to players who sell quality raw material.

“Our sales force met with stiff resistance when we increased the prices to Rs 300 per kg on December 1. But now, most of our regular buyers have come back to us as they could not deliver good taste with cheaper raw materials,” he added.

While roasters have increased powder prices only last month, the post-monsoon drop in production estimate hints at an another round of upward revision in January. According to Karnataka Planters’ Association data, markets may see a 10% decrease in Arabica production from the estimated 99,500 tonne due to bad weather.

Coffee prices in India are traditionally based on international prices because three-fourths of the production is exported.