USDA: India’s 2021-2022 Coffee Crop Pegged at 5.53 Million Bags

CoffeeNetwork (New York) – According to the latest USDA report, India’s 2021/22 coffee production (October/September) is forecast at 5.53 million 60- kilogram bags. Unseasonal rains in November are expected to negatively impact Arabica crop yields and delay the harvest by at least two weeks, which will be offset by higher yields of Robusta leading to a six percent increase in overall coffee yields. Indian coffee prices continue to increase as rising export demand is stymied by shipping congestion/delays, limited container availability, and higher freight costs. Domestic consumption is estimated higher at 1.2 million 60-kilogram bags as growing home consumption of coffee is supported by a gradual reopening of restaurants, cafes, and the rest of the hospitality sector.

Area and Production

Post estimates marketing year (MY) 2021/22 planted area to 455,000 hectares with a bearing area of 420,000 hectares. Post estimates marketing year (MY) 2021/22 coffee production (Oct/Sep) at 5.53 million 60-kilogram bags. More specifically, Arabica production is estimated at 1.28 million 60- kilogram bags or 76,800 metric tons (MT) while Robusta production estimated at 4.25 million 60- kilogram bags (255,000 MT). At present, the Coffee Board of India estimates MY 2021/22 post blossom Arabica and Robusta production is 108,300 and 260,700 metric tons, respectively.

Continuous rainfall during the first ten days of November in the major coffee growing districts in Karnataka along with forecast rains during November 13-17 as per the Indian Meteorological Department (IMD) may negatively impact trees ready to be harvested, especially Arabica parchment and washed coffees. Parchment coffee consists of coffee beans that are dried in the sun after being extracted through a wet milling process. Overcast conditions will likely delay harvest as green coffee beans need at least 10-14 days of bright sunshine for the drying process. In India, about 80 percent of Arabica and 20 percent of Robusta coffees are wet processed (parchment coffee) and the remaining volumes are dry processed (cherry coffee).

The Coffee Board of India recently published its latest estimate of MY 2020/21 production figures. According to the board, Arabica production is estimated at 1.65 million 60- kilogram bags (99,000 MT) and Robusta production at 3.91 million 60- kilogram bags (235,000 MT). Post has revised its MY 2020/21 estimates but has not adopted the final estimates as sources indicate that these estimates may be revised later.

Yields

Unseasonal rains in November are expected to negatively impact Arabica crop yields and delay the harvest by at least two weeks, but this will be offset by much higher yields of Robusta. Post estimates Arabica yields to be lower by two percent as compared to last year. The lower Arabica yields are expected to be offset by a nine percent increase in Robusta yields. Post estimates overall yields to improve by six percent to 789 kilograms per hectare as compared to last year. The government is advising growers to undertake weeding operations at plantations. With sufficient soil moisture availability, growers can perform a third round of fertilizer application based on soil test values. Growers have been advised to spray fungicides to prevent leaf rust and insecticides to control coffee berry borer infestation.

Inputs

Indian coffee is a highly labor-intensive crop due to the multiple pickings/harvesting, pruning, drying, cleaning, and packing requirements. The hilly terrain of India’s growing regions limits the ability of plantation owners to adopt mechanization options. Consequently, labor costs constitute around 60 percent of the total cost of production. The rising costs of labor are prompting growers to reduce the number of pickings to one round instead of two or three. According to the Coffee Board of India’s statistics, the general daily wage rate in the state of Karnataka rose by five percent in 2021 from the previous year. Similarly, wage rates increased by 2.5 and 3.5 percent in Kerala and Tamil Nadu, respectively. Aside from labor costs, the costs of fertilizers, pesticides, energy, along with government mandated benefits have risen as well.

Consumption

Post estimates MY 2021/22 domestic coffee consumption to be one percent higher than the official USDA estimate at 1.21 million 60-kilogram bags. 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 gradual reopening of the hospitality (hotels, restaurants, catering events) and institutional (corporate offices, airports) sectors. Robust sales during the pandemic last year led a number of regional coffee processors/retailers to pursue and expand their footprint in new cities and explore new retail channels (other than traditional retail stores) with wider product offerings. Post expects that household consumption of soluble coffee will likely constitute a much larger share (65 percent) of domestic consumption during the next year. The major challenge for suppliers in the short term remains rising energy costs, which not only impacts raw material processing costs but other expenses such as packaging, freight, and logistics.

Trade

Post estimates MY 2021/22 exports at 5.69 million 60-kilogram bags (341,100 MT) due to increased demand in major export markets. Post expects export demand to remain strong in MY 2021/22, however trade sources indicate that current prices are limiting international buyers from placing larger orders. New crop arrivals from December onwards should help keep the prices in check and orders should increase, however there may be a slight reduction (3-4 percent) in the export of green beans as higher freight costs push buyers to consider sourcing coffee from other origins, such as Uganda. According to Coffee Board of India data, green bean prices for Arabica parchment and Robusta cherry have increased by 27 and 13 percent, respectively, since May 2021. Domestic Arabica crop prices are coming in line with global prices, however, the increase in Robusta prices is much lower compared to global market prices for Robusta coffee. Trade sources indicate that both domestic and international coffee prices will remain high as rising freight costs (due to shipping delays) will remain for additional 6-12 months. Trade sources indicate that the cost of shipping a container to European destinations has gone up sevenfold compared to last year. There is also a higher frequency of cancelations by carriers when booking space on vessels, and there are substantial delays in transit times. In MY 2020/21 (Oct/Sep), the major export destinations for Indian coffee were Italy (22 percent), Germany (12 percent), Belgium (10 percent and Libya (4 percent). Post estimates MY 2021/22 imports at 1.39 million 60-kilogram bags (83,320 MT). Trade sources indicate that imports of green beans are lower due to higher freight costs, prompting processors to substitute imports with local supplies. Most imported coffee is processed for re-export due to duty exemptions and lower overall prices. In MY 2020/21, imports of green coffee into India came from Indonesia, Kenya, Vietnam, and Uganda.

Stocks

Post estimates MY 2021/2022 carryover stocks at 581,000 60-kilogram bags (35,000 metric tons), which will increase by the end of the year due to higher production. There are no government held stocks. The stocks are privately held by either growers or traders. Trade sources indicate that current high prices have led to limited unsold stocks of Arabica in the market. However, when peak arrivals begin in mid to late December, priced are expected to correct marginally.

Alexis Rubinstein