Coffee growers in the south are in dire straits after bean prices nosedived, adding to woes that include erratic rains and labour shortage.
Knock follows rain-labour double whammy
BANGALORE: Coffee growers in the south are in dire straits after bean prices nosedived, adding to woes that include erratic rains and labour shortage.
Industry insiders said big hedge funds have been exiting coffee futures contracts for some time now, which is leading to the crash in prices.
“Robusta coffee costing around $2,600 per tonne in August has fallen to around $1,570 per tonne today. While Arabica coffee, which in August was priced at $1.5 per pound, now costs around $1.1 per pound,” said N Bose Mandanna, a coffee planter from Coorg, who is also a member of the Karnataka Planters’ Association (KPA).
According to Coffee Board chairman G V Krishna Rau, these low prices will persist for the next few quarters.
“Low prices will remain for sometime as the coffee yield in Brazil and Vietnam this year has been very good.”
What makes matters worse for planters is that export demand for coffee has come to a standstill as buyers expect prices to dip further. Planters are currently only honouring their old contracts with no fresh contracts coming in.
“Generally by mid October our fresh export orders start coming in. But we are receiving only enquiries as people are expecting prices to fall further,” said coffee planter K A Ayappa, who runs the Craigmore Estate in Coorg.
The coffee harvest season starts in October of which more than 70% is exported. Italy and Russia which together account for around 35% of the exports are the biggest buyers.
Coffee productivity is also expected to be hit with coffee planters claiming that the coffee production in the country for 2008-09 will be around 25% less than the Coffee Board’s earlier estimates. The Coffee Board’s crop production forecast is around 293,000 metric tonnes (MT), way off the mark from the planter’s estimate of around 220,000 MT.
Coffee Board’s Rau acknowledged that productivity would be hit and the Coffee Board will revise its estimates in late November.
“We received extremely heavy rainfall this February and August which has adversely affected the crop,” added Rau.
Chairman of Karnataka Planters’ Association (KPA) C M Pemmaiah said that the shortage of labour will further erode productivity. Coffee production in India is largely labour intensive and accounts for around 65% production costs. “There is an acute shortage of labour with most workers opting for better paying construction jobs in cities like Bangalore and Mysore,” he added.
According to United Planters’ Association of South India (UPASI) the coffee plantations across India employ over 5 lakh labourers who are paid around Rs 150 per man day. Pemmaiah said that the industry is currently facing a 40% shortage in labour force.”
The domestic coffee production for 2007-08 is expected to be 262,000 MT down from 291,000 MT the previous year.
n_pranav@dnaindia.net
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