The Indian coffee industry is looking forward to the Association of Coffee Producing Countries (ACPC) retention plan to bail it out of its current distress. But past performance of the ACPC retention plans in 1993 and 1995 indicates that it is nothing more than an immediate relief measure.
"India is a marginal player in the world coffee market and it has no major role to play in the ACPC meeting. It is more an initiative of Brazil which wants the other coffee producing nations to cooperate. But what about Vietnam? It is not a member country and its production has been increasing every year. In four years it has become the second highest coffee producing country. How will ACPC control them?," asked Karnataka Coffee Brokers Association spokesperson, Arun Bidappa.
The ACPC will meet in London this week to discuss the new retention plan, hoping to boost coffee prices which at present hover around the cost of production.
The first retention scheme was started in 1993 by eleven countries such as Brazil, Columbia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras. By May the following year, and so well before the market was sent spiraling higher by frosts in Brazil, the scheme's price objectives had been met. Retention was suspended and authority given for all stocked coffee to be released.
But the big gains that followed the freeze did not last and in 1995 the second retention scheme was drawn up. This time it was difficult to get the finance. The initial cost of retention became much higher because of possibility of increased capital losses couples with selling pressure of the members. And then Brazil failed to play its part in controlling exports and Guatemala pulled out. The second retention plan, thus crashed. It was replaced by the export programme.
Yet again, as perhaps the ACPC stands helpless to regulate coffee prices, on February 18, 2000, the ACPC council requested the secretariat to prepare a plan to combat the low prices. And the only way out seems to be the retention scheme.
"Every time that there is a balance in the market and the coffee prices rise, growers step up production. This will bring down the prices again. And then again another retention plan will be formed. It is a cycle you can't get out of. The only way to create a healthy market is to increase consumption," said Bidappa.
"India and China are ready markets where you can increase consumption. As of now, In these markets the level of coffee consumption is at 25 to 30 gm per person vs 11 kg per person in the Scandanavian countries. And yet there is no effort to promote coffee in India. That is a long term solution. I don't think that the ACPC retention scheme will do wonders for the Indian coffee market."
The ACPC hopes that this time the effect of the scheme will be more long lasting as compared to the earlier plans, when the market was in deficit, the current situation is of surplus but the socks are at their lowest, especially in the consuming countries.
