Coffee prices are ruling 10 per cent higher than the international price levels.
Indian coffee exporters, roasters and traders are deferring their buying plans, as domestic coffee prices are 10 per cent higher than global levels.
After a sharp drop of 20 per cent in international coffee prices in the past month, domestic planters are reluctant to sell their produce in the hope of a better price in future.
“Supply of coffee is less, pushing up the prices at home. So, exporters, roasters and traders are not entering into any buying obligation as they think these prices are higher than ruling global prices,” a top official of a Bangalore-based coffee retailer said.
He said only those exporters who had entered into contracts previously had to buy at higher domestic price to honour supply obligation.
The price of Arabica in the international market has dropped to $2.3 a pound in recent days from $2.9 a pound a month back in the ICE Exchange. Robusta prices have corrected to $2,534 a tonne in Liffe Futures, London, from a high of $2,700 a tonne in the recent past.
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Domestic prices are ruling higher by Rs 30-40 a tonne on an average over international prices. “Coffee retailers and roasters may pass on this higher price to consumers if they are not successful in bargaining with planters to buy at a cheaper price," the official said.
Some other exporters also feel buyers are less inclined to hold stock as holding inventory has been expensive due to interest rate hikes. “It's not only planters who are reluctant to sell their produce at a lower price point, but also exporters and traders are inclined to hold stock due to higher holding cost,” said Ramesh Rajah, president of Coffee Exporters Association.
While planters are holding on to stock in the hope of an upward trend in the price, buyers’ are deferring its purchase in the hope of downward price correction, he added. India produces around 300,000 tonnes of coffee per annum, out of which 70 per cent is exported to other countries. Indian planters and exporters have benefited from higher price trend of coffee in global markets in the last one year. However, recent price corrections in most commodities has created an uncertain environment in pricing in recent time.
“A certain degree of volatility has crept into the overall pricing. So, wait and watch policy is now being followed by all stakeholders,” Rajah said. Referring to this matter, Suresh Babu, a Hyderabad-based trader said domestic prices used to shoot up keeping pace with global prices. However, downward revision in international prices is never followed swiftly in the country, he added.
However, planters are of different opinion regarding this matter.
"Price correction has nothing to do with selling decision as most of the Arabica from India and around 60 per cent of Robusta has been sold. So, planters are not holding back any stock as of now," said Sahadev Balakrishna, chairman of Karnataka Planters Association.