Prices of forward coffee contracts for export delivery during July-September to Japan are expected to fall, due to a possible downward trend of consumption in that country in the aftermath of the earthquake. However, coffee contracts for April-June delivery will not come for renegotiation, according to exporters.
“Importers from Japan have already entered into delivery contract for April-June and there is less possibility of renegotiation of these contracts. However, forward contracts for delivery during July-September is expected to fall,” Ramesh Rajah, chairman of Coffee Exporters’ Association of India said. He said the extent of fall of these delivery contracts was difficult to predict as of now.
Japan is the third-largest global importer of coffee. It imports 1.3 million tonnes of green coffee and is the fourth-largest consumer of the commodity in the world. The country consumes the premium variety of arabica, most of which is imported from South American nations like Brazil and Colombia.
“We are getting reports that people are not coming out to departmental stores for fear of radiation exposure in some parts of the country. However, it is too early to ascertain the fall in demand at this point of time,” Rajah said.
Meanwhile, the Japanese crisis has had its reflection on arabica prices in the international exchanges. These were ruling at a 14-year high of 290-295 cents/lb at the New York Exchange and have seen a correction of around 10 per cent after the Japanese crisis. Prices are now 265-270 cents/lb for three-month delivery. “Though the Japanese crisis worked as a trigger, other factors like profit booking and less fund buying have also contributed towards the fall,” he said. Rajah added arabica prices were expected to be range-bound in the near term.
According to commodity analysts, the Japanese crisis will have little impact on Indian exports as our exposure is very small.
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“Overall exports from India will not suffer despite a possible demand fall from Japan as we export only around 1,600 tonnes of premium coffee to that country,” Marvin Rodriguez, vice-president of Karnataka Planters’ Association (KPA) said. He, however, said arabica prices would remain subdued in the near-term on the back of this crisis.
Some analysts have a different opinion. “While it is too difficult to predict a demand fall in Japan in the aftermath of this crisis, supply constraints from producing nations like Brazil and Colombia will compensate for any demand-supply mismatch,” Biren Vakil, director of Paradigm commodities said. He also said the pricing trend of the commodity was expected to evolve in 30-40 days, as extent of damage in the Japanese economy would be fully ascertained during this period.