Freight hike may slow down coffee exports

Coffee exports, already hit by price mismatch and rupee's strength against dollar, is likely to be further impacted by the recent increase in freight cost, exporters said.

Shipping lines have raised freight cost for containerised shipments of coffee. Freight rates of coffee to European ports have been hiked to $1,950 a container of 20 feet from $1,350.

Coffee is mainly exported through containerised shipments. "Coffee is price sensitive. With this freight cost increase, we would be at a disadvantage," said Ramesh Rajah, president, All India Coffee Exporters' Association. Indian coffee exports have fallen mainly because of price mismatch between domestic and overseas rates, rising rupee, and shortage of food-grade shipping containers.

Growers in India have been asking for higher rates over international prices leading to fall in exports. Increase in freight rates adds to the price of Indian coffee in international markets, exporters said. "With Thursday's sharp fall in international rates due to the global sell-off, the mismatch has further widened," said A N Devraj, proprietor of Sarathy Curing Works.

On Thursday, robusta coffee for November delivery on London International Financial Futures Exchange ended at $1,685 a tonne, down $64 on selling by funds and speculators. September arabica coffee on New York Board of Trade closed at $1.1130 (Rs 46) a pound, down 7.9 cents.

Growing demand for containerised shipments have prompted shipping lines to up rates, exporters said. "Shipping lines are faced with strong demand from China. They don't look at India especially for coffee," said V Ovian, proprietor of Bangalore-based Indcaffe.

According to him, coffee in containerised shipments offers much low margins than other goods for shipping lines. Indian coffee could lose out on European demand because of the freight cost increases, Rajah said.

Europe is one of the key destinations of Indian coffee. "Indian coffee is already priced out of the US market because of the distance. Brazil and other South American countries are much closer to that market," he said.