USDA Attache: India’s 2023-2024 Crop Seen at 5.8 Million Bags

CoffeeNetwork (New York) – According to the latest USDA attache report, India’s 2023-2024 coffee crop is pegged at 5.8 million 60-kilogram bags. Post foresees arabica coffee production at 1.23 million 60- kilogram bags or 73,800 metric tons (MT), while robusta coffee production is seen at 4.58 million 60- kilogram bags (274,800 MT). For MY 2022/2023, lower yields for arabica (down seven percent) and robusta (down 11 percent) coffee crops are expected compared to the previous market year. Lower yields are anticipated as a result of reduced alternating year fruit production in the case of arabica coffee, combined with poor pre-monsoon rains in March-May 2023, that followed the earlier prolonged dry spell that ran from last December 2022 through March 2023.

Post estimates India’s MY 2022/2023 coffee production at 6.25 million 60-kilogram bags (375,000 MT). The Coffee Board of India has just published its post-monsoon MY 2022/2023 production estimates. It is estimating arabica coffee production estimated at 1.58 million 60-kilogram bags (~101,500 MT) and robusta coffee production at 4.11 million 60-kilogram bags (~246,600 MT). The Coffee Board forecasts, however, are made three times during the season – post-blossom (May-June), post-monsoon (OctoberNovember), and final (March-April). Trade sources report that the coffee board’s post-monsoon forecast for arabica coffee is much higher than industry’s own estimations, while robusta production should actually be higher. Post is not adopting the Coffee Board of India’s current estimation as trade sources indicate further revision may be necessary and will be reflected in the final estimates.

CROP AREA FAS Mumbai (Post) forecasts marketing year (MY) 2023/2024 (October-September) area planted at 477,000 hectares, with an area harvested of 434,000 hectares. Arabica coffee (Coffea arabica) bearing area is expected to reduce marginally (i.e., less than one percent), with expected yields dropping seven percent to 360 kilograms per hectare. With arabica coffee entering its ‘off-year’ in its biennial crop production cycle, fruit production will be lower this alternating year. Post anticipates robusta coffee (Coffea robusta) bearing area to increase by five percent, but yields are nonetheless still expected to come in lower by 11 percent at 1,200 kilograms per hectare. The drop in yield numbers in MY 2022/2023 compared to last year is attributed to poor pre-monsoon rains occurring in March-May 2023, Page 3 of 12 followed with the expectation of an average, normal southwest monsoon. Robusta coffee crop yields, nonetheless, are still arriving above both the three-year and five-year averages.

Timing of India’s Coffee Harvest: In India, the arabica coffee crop harvest normally takes place from November to January, while the robusta crop harvest runs December to February. This makes timely, rains in February and March crucial for realizing robust overall crop yields. This year’s robusta crop is expected to produce less fruit compared to the previous year, which Post attributes to a deficit in rainfall and irrigation water availability. Robusta coffee is India’s most popular coffee type, accounting for over 70 percent of the national coffee crop production.

Indian Meteorological Department (IMD) Reports a Rainfall Deficit: The coffee growing regions in southern Karnataka’s interior received deficit rains throughout January-February 2023. This was followed by drier conditions during the pre-monsoon rains (known colloquially as the blossom showers); these showers provided limited moisture. Once the blossom showers end, plant flowering is complete. However, for the fruit to set, backing showers (i.e., received within 15-20 days after the blossom showers end) are crucial. The blossom showers, and backing rain showers, are critical aspects governing the coffee plant’s flowering and productivity. Timely arrival of rainfall, and right intensity levels, are necessary to break the flower buds’ dormancy stage. If rainfall is delayed, or weak, fruit setting drops significantly, negatively impacting yields. Limited water availability will also increase the possibility of crop failure.

Monsoon Patterns Disrupted, Production Impacted – Climate Change Evidenced: Coffee planters and agricultural researchers alike report growing concerns with the northeast (October-December) and the southwest monsoons’ (June-September) rainfall patterns. Monsoon rainfall patterns are increasingly varying, impacting production and yields over the last three years. While rainfall has increased during the northeast monsoon, rainfall volume during the southwest monsoon has dropped. Increased rainfall in November-December is coinciding now much more closely with the arabica coffee harvest period. Rainfall downfall intensity is also increasing, damaging the standing coffee crop, while also hampering harvest operations. Unseasonal rainfall, along with higher temperatures, will damage and discolor coffee beans. Excessive rainfall will dislodge flowers and fruits. Heavy rainfall during the harvest will increase moisture levels, leading to greater proclivities for mold growth, disease, and excessive fruit fermentation, all of which may increase coffee bean defects.

YIELDS FAS Mumbai forecasts India’s MY 2023/2024 arabica coffee yields to fall to 360 kilogram per hectare, a seven percent decrease from last year. Robusta yields foreseen at 1,200 kilograms per hectare, are set to also come in 11 percent lower than the previous market year. Post foresees arabica coffee yields set to continue witnessing a downward trend over time; the variety is more sensitive to temperature increases and vulnerable to climate induced upticks in pest infestations.

CONSUMPTION FAS Mumbai forecasts India’s MY 2023/2024 domestic coffee consumption at 1.285 million 60- kilogram bags, down by just under three percent compared to MY 2022/2023 estimated 1.32 million bags. Post attributes the drop to a slowdown in demand being driven by higher coffee prices. Rising coffee prices are biting into consumers’ wallets, curbing spending, and driving consumers to downgrade to more affordable at-home consumption options. Coffee prices in the short-term have been climbing upwards as a result of rising energy costs, which impact raw material processing costs and other expenses such as packaging, freight, and logistics. Post expects that household consumption of soluble coffee will constitute a much larger share (69 percent) of domestic consumption during the next year.

Strong sales since the COVID-19 pandemic have led regional coffee processors/retailers to pursue and expand their footprint in additional cities, while exploring new retail channels (other than traditional retail stores) with wider product offerings. Trade sources indicate that new investments are being made in retail channels, to include specialty cafes, kiosks, pop-up café, and café bookstores. Investment is targeted at consumers seeking to trade up, looking for premium/gourmet options with wider specialty offerings like espresso or instant, cold brews, functional coffees (including immunity boosting functional ingredients and botanicals), and flavored coffees. The emergence of specialty coffee shops, which roast specialized blends in smaller quantities, is helping to expand consumption along with consumer awareness of coffee varieties, processing and roasting methods, and styles.

TRADE
Exports: FAS Mumbai forecasts MY 2023/2024 exports at 6.33 million 60-kilogram bags (~380,000 MT), two percent higher than last year due to increased demand in major export markets. Post expects export demand to remain strong throughout MY 2023/2024, however trade sources do indicate that current prices are limiting international buyers from placing larger orders. Indian farmgate coffee prices are trading at decade high rates, driven by a global surge in international coffee prices due to supply issues. According to Coffee Board of India data, green bean prices for arabica parchment and robusta cherry have increased by nine and 24 percent, respectively, since the beginning of Indian marketing year in October 2022. Both varieties are trading well above International Coffee Organization (ICO) indicator prices. Both increases are a function of a crop shortages.

During the first four months (October 2022-Januanry 2023) of MY 2022/2023, Indian coffee exports fell by 24 percent and 74 percent in volume compared to the same period last year. Italy remains the major export destination for Indian coffee followed by Germany, Russia, and Belgium. Nonetheless, while India’s coffee export market share for Italy, Germany and Belgium has reduced significantly, India’s Page 10 of 12 export market share of Russia (primarily soluble coffee) has increased by 15 percent during the first four months of the marketing year.

According to preliminary data published by India’s Ministry of Commerce and Industry, while coffee exports have reduced by volume, Indian coffee exports in March 2023 were 18 percent higher by value as compared to same period last year.

Similarly, cumulative (April 2022 to March 2023) coffee exports were 12 percent higher as compared to similar period last year. The normalization of freight costs, weaker Indian rupee, along with availability of containers has supported exports. Increasingly, international coffee processors/retailers are realizing that their branding is a critical component for coffee sales. International brands feel it is easier, much more economical, and safer to procure from the other existing manufacturers. International brands are increasingly partnering with Indian suppliers who can create new products for them, while outsourcing additional requirements. This has taken on increased relevance for European brands, that due to Russia’s unprovoked war with Ukraine in 2022, witnessed surging energy prices along with supply chain and logistical disruptions. Indian suppliers are actively seeking to position themselves as better, more dependable long-term partners.

Imports: FAS Mumbai forecasts MY 2023/2024 imports at 1.55 million 60-kilogram bags (93,000 MT), a nine percent decline from last year. With some large Indian processors setting up and or adding capacity in Vietnam, imports for green beams for processing and re-exports will be lower. Trade sources inform that instant coffee plants are operating at near peak capacity. The upswing in processing is being fueled by higher instant coffee revenues being realized along with plantation operations’ optimization.

Post foresees soluble coffee exports increasing by two percent as the demand for instant coffee is expected to grow by between 2-2.5 percent in the long-term. Imports of raw coffee green beans in the first four months (October 2022-January 2023) of MY 2022/2023 rose by 23 percent compared to the same period a year ago. Most imports are green beans (99 percent share) meant for processing and re-exports. Indonesia, Vietnam, Kenya, and Uganda are major green bean suppliers for the Indian market.

STOCKS FAS Mumbai forecasts MY 2023/2024 carryover stocks at 473,000 60-kilogram bags (~28,000 MT), on strong domestic and export demand. India has no government-held stocks. Coffee bean stocks are held by growers and or traders. Trade sources indicate that current high coffee prices have led to limited stocks of robusta on the market. Processors are now augmenting supplies through imports. Post finds that MY 2022/2023 opening stocks at close to record lows, with the sparse number being driven by strong exports after major exporting countries faced supply issues.