Output seen up at 290,000 tonne

IN FOCUS/ COFFEE

The forecast for domestic coffee production in the marketing year 2005-06 (October to September) has been put at 290,000 tonne or 4.8 million bags (60 kg), higher by five per cent than the revised estimate of 275,500 tonne (4.6 million bags), according to the Foreign Agricultural Service of the United States Department of Agriculture.

The increase has been attributed to excellent pre-blossom showers in growing areas, forecast of a normal monsoon by the Indian Meteorological Department and the likely higher use of inputs such as fertilisers and pesticides and use of better management practices by growers.

Consequently, the forecast for coffee exports in 2005-06 has been revised up at 230,000 tonne because of the likely larger production and increased availability. The 2004-05 estimates for exports have been revised down to 170,000 tonne based on the trend from October 2004 through April 2005 and the current shortage of coffee for export.

Exporters believe that farmers and traders, in expectation of even higher prices, are holding back stocks, which will start coming into the market in the last quarter of the marketing year.

However, on the production front, the white stem borer, a destructive pest, continues to threaten particularly the Arabica plantations. This has reportedly affected 2,000 hectare of coffee and is still spreading. This is one of the main reasons for the recent downward revision of the 2004-05 production.

The 2005-06 production is likely to consist of 105,000 tonne of Arabica and 185,000 tonne of Robusta, compared with 103,400 tonne of Arabica and 172,100 tonne of Robusta in the previous year.

The recent improvement in coffee prices and a significant fall in vanilla and pepper prices is expected to discourage inter-planting of coffee with these crops, although most Indian coffee growers continue to use crop diversification as a risk management tool and coffee quality-improvement strategy.

Coffee consumption estimate is almost unchanged at around 70,000 tonne in 2005-06. Although retail coffee prices have risen in recent months, consumption is not expected to decline. The average coffee consumption in India is low at 10 cups per person annually.

Traditionally, coffee consumption has been confined to southern states. The instant coffee segment is almost entirely branded and packaged one and dominated by multinationals such as Nestle and Lever. The absence of smaller players is a result of high investments and marketing costs.

Due to a growing domestic and export demand, production of instant coffee is increasing and capacity is expanding, with one south-based company, Narasu's, recently getting into instant coffee production.

In addition, some international coffee chains, including Starbucks, have started sourcing coffee from Indian companies.