Italian debt crisis casts shadow over coffee exports from india

India exports 200,000 tonnes annually and around 25 per cent of this is routed towards Italy.

The Italian debt crisis is casting a shadow over the prospects of coffee exports from India, as this European country is the largest importer of coffee from this region. Indian exporters are keenly watching the situation in Italy before taking any supply obligation and hope domestic demand will remain robust.

India exports around 200,000 tonnes of coffee annually and around 25 per cent of this is routed towards Italy, which buys robusta parchment at a premium from the country. Portugal and Greece, also hit by the crisis, account for around 1.5 per cent and 2.35 per cent of the export pie, respectively. India exports close to 70 per cent of its produce, pegged at 300,000 tonnes. In value terms, the exports bring in around Rs 2,000 crore.

“We don't see an immediate impact, as most of the Indian coffee has already been exported. However, there will be a definite fall in demand for Indian coffee in the next season if this situation continues,” Ramesh Rajah, president of the Coffee Exporters' Association of India said. He said in case the debt crisis continued, the fall would be substantial.

Barring a dip in demand, exporters are also apprehensive about the possibility of default in payments for their consignments. “There are reports suggesting that some importers have already defaulted on Vietnamese consignments. So, it is risky to take supply obligations to these countries in this scenario,” Rajah said.

Referring to this matter, Sahadev Balakrishna, chairman of Karnataka Planters' Association, said there was no impact on the demand for Indian coffee due to this crisis. “Coffee is an essential commodity in Italy and there is less chance of fall in demand due to this crisis. It's a different matter in case of Greece and Portugal, as they are relatively smaller clients,” he said.

He, however, said India was the market leader in the robusta parchment variety, procured by these European nations and any dip in demand would adversely impact production of this variety domestically.

Robusta parchment is exclusively used by the Italian and other quality-conscious European roasters as a blend in the preparation of 'espresso' and 'capuccino' coffees. India, the market leader of this variety, produces 20,000-30,000 tonnes per annum and determines the price trend globally.

However, all are not agreed on the possible impact of the euro zone crisis on coffee exports and prices. “Impact will be minimal on coffee in the international market, as there will be supply issues to drive demand and price of the commodity,” Biren Vakil, director of Paradigm commodities, said.

He also said that despite the euro zone crisis, the long-term outlook on coffee remained bullish. However, he said financial institutions would not be forthcoming in taking exposure to these regions in the short term.