USDA Attache: India’s 22-23 Coffee Crop to Jump 9% to 6.25 Million Bags

CoffeeNetwork (New York) – The latest USDA attache report notes that marketing year (MY) 2022/23 coffee planted area is forecast at 465,000 hectares with harvested area at 433,000 hectares. Post estimates harvested area to increase by one percent from last year as more replanted trees become fruit bearing.

Post estimates marketing year (MY) 2022/23 coffee production (Oct/Sep) at 6.25 million 60-kilogram bags, nine percent higher than official USDA estimate. Arabica production is estimated at 1.32 million 60- kilogram bags or 79,200 metric tons (MT), while Robusta production is estimated at 4.92 million 60- kilogram bags (295,200 MT).

Karnataka received normal to excess rains during southwest monsoon 2022, followed by normal rains in October that provided adequate moisture. Rainfall within normal range is beneficial for early ripening and maturity, and producers have sufficient water for irrigation. A dry period of two-three months during December to February would facilitate uniform flowering of Robusta plants to blossom showers (summer showers received in mid-February to March as they trigger uniform flowering of coffee bushes) for bud formation. Trade sources indicate that fly picking (small scale picking of ripe berries) began in October, and the main harvest will begin in December.

The Coffee Board of India published its final MY 2021/22 production estimates with Arabica production at 1.58 million 60- kilogram bags (95,000 MT) and Robusta at 4.11 million 60- kilogram bags (247,000 MT). Post has not adopted the final estimates as trade sources indicate further revision may be necessary.

Yields

Post estimates Arabica yields thirteen percent higher as compared to last year on higher harvested area and sufficient soil moisture. The Higher Arabica yields will be matched by a three percent increase in Robusta yields. Post estimates national yields to improve by five percent to 866 kilograms per hectare as compared to last year.

Inputs

Coffee production in India is labor-intensive due to multiple pickings/harvesting, pruning, drying, cleaning, and packing requirements. Hilly terrain limits the ability of plantation owners to consider mechanization options. Consequently, labor costs constitute around 60 percent of total costs of production. The rising costs of labor are prompting growers to reduce permanent labor at estates and contract seasonal labor. According to Coffee Board statistics, the general daily wage rate in the state of Karnataka rose by five percent in 2021 from the previous year to $4.40 per day (INR 357 per day). However, trade sources indicate that wage rates paid are upwards of $4.70 per day (INR 380 per day) and labor availability is becoming a significant challenge as daily labor shifts to higher wage-earning jobs in construction and other sectors. Additionally cost of fertilizers, pesticides, power, and social and statutory mandated benefits by the government have all risen as well.

Consumption Post estimates MY 2022/23 coffee consumption at 1.32 million 60-kilogram bags or 79,200 metric tons (MT), seven percent higher than the official USDA estimate. The increase in demand is largely driven by sales of soluble coffee for at-home consumption through e-commerce and retail channels. Post expects the rise in at-home consumption will be supported by the ongoing opening of the hospitality (hotels, restaurants, catering events) and institutional (corporate offices, airports) sectors. Trade sources indicate that the adoption of a hybrid working model has led to a surge in at-home coffee consumption due to flexible work from home policy. Robust sales during the last year have led several regional players (local roasters and soluble coffee manufacturers) to pursue and expand their capacity and footprint in newer cities, and explore new formats (specialty cafes, kiosks, pop-up café, café bookstores), with wider product specialty offerings like espresso or instant, cold brews, functional coffees (includes functional ingredients and botanicals to boost immunity), and flavored coffees. Post expects household consumption of soluble coffee to constitute a much larger share (65-70 percent) of domestic consumption during the next year. The major challenge for suppliers in the short term remains rising energy costs impacting the raw material processing, packaging, freight, and logistics.

Stocks

Post estimates MY 2022/2023 carryover stocks at 261,000 60-kilogram bags (15,600 metric tons), on strong domestic and export demand. There are no government-held stocks, all are privately held by either growers or traders. Trade sources indicate that current high prices have led to limited stocks of Robusta on the market. However, when peak arrivals begin in mid to late December, prices are expected to correct marginally. MY 2021/22 carryover stocks were one of the lowest on record, driven largely to strong exports after major exporting countries faced supply issues.

Trade

Post estimates MY 2022/23 exports at 6.23 million 60-kilogram bags (373,520 MT) on increased demand in major export markets. However, trade sources indicate that current high prices coupled with high energy costs, rising packaging costs, uncertainty on freight times, and high interest rates are limiting international buyers from placing larger orders. International buyers are limiting inventory to two-three months and do not want to carry inventory at high prices.

Expected large new crop arrivals from December onwards should stabilize prices and increase orders in small export markets. Trade sources indicate that markets such as the UAE, Jordan, Turkey, Tunisia, Lebanon, and Egypt who were traditionally Latin American purchasers began purchasing Indian Robusta coffee in MY 2021/22 and will likely continue in the next year if supplies from Latin America are limited.

According to Coffee Board data, green bean prices for Arabica Parchment have fallen by twelve percent since May 2022, and Robusta Cherry prices have reduced marginally by one percent. However, global prices of Arabica and Robusta have fallen by 21 percent and ten percent respectively. Trade sources indicate that the price of Indian coffee is likely to reduce further with arrival of the new crop. In MY 2021/22 (Oct/Sep), the major export destinations were Italy (17 percent market share), Germany (10 percent market share), Belgium (7 percent market share) and Russia (7 percent market share).

Post estimates MY 2022/23 imports at 1.51 million 60-kilogram bags (90,600 MT), two percent higher than official USDA estimate. Trade sources indicate that imports of green beans are estimated to be higher due to strong export demand prospects for soluble coffee prompting processors to augment local supplies with imports. Most imported coffee is processed for re-export due to duty exemptions and lower overall prices. In MY 2021/22, imports of green coffee into India came from Indonesia (38 percent market share), Vietnam (28 percent market share), Kenya (17 percent market share), and Uganda (9 percent market share).

MY 2021/22 Export data to be reviewed

 As per the monthly ICO Coffee Market update report published in October 2022, India’s exports of all forms of coffee jumped 21.7 percent in coffee year 2021/22, rising to 7.24 million bags from 5.95 million 60-kilogram bags in MY 2020/21. Post has also referred to the Indian customs data which is in line with the ICO report. However, the coffee board database for July 2022 is reflecting much lower export shipment data for MY 2021/22 and may need to be revised.