Traditionally a tea exporter, India is making significant inroads into the global coffee export market with total exports during the current financial year up to November crossing the $1-billion mark for the first time, according to data from Centre for Monitoring Indian Economy (CMIE).
The sharp growth is partly attributed to a surge in Robusta coffee prices, which account for over 40 per cent of global production, and partly due to stocking ahead of the European Union’s new deforestation regulation that could raise the cost of coffee as well as several other agricultural exports to the EU.
India’s coffee exports rose to a record high of $1,146.9 million between April and November in FY24, compared to $803.8 million during the same period last year, registering a 29 per cent rise. This figure is nearly double the exports during the same period in FY21, which stood at $460 million.
Global Robusta prices have soared to multi-decade highs due to supply issues in major coffee-producing countries like Vietnam and Brazil.
According to news agency Reuters, the price of Robusta beans peaked at $4,667 per metric ton on the London-based ICE Futures Europe market in June, marking a 63 per cent increase this year alone.
Notably, India’s exports of tea saw little change despite expectations of gaining new markets following the economic crisis in Sri Lanka, one of the largest tea exporters in the world.
A government official said that Indian coffee managed to capture the “premium segment” of the export market unlike in the case of tea.
A report by the United States Department of Agriculture (USDA) earlier this month highlighted that drought and high temperatures in Brazil during the fruit development and filling period caused Arabica and Robusta yields to fall below initial projections. With nearly flat output, Brazil’s coffee bean exports are forecast to drop by 2.6 million bags to 40.5 million, primarily due to last year’s inventory drawdown, which reduced total supplies.
Notably, Brazil is the world’s largest coffee producer, contributing about 40 per cent of global production.
Meanwhile, Vietnam, the second-largest coffee producer, has also reported lower production forecasts. Although Vietnam’s coffee production is expected to recover by 2.6 million bags to 30.1 million, it will still remain below the record crop of 2021/22, according to the USDA.
Coffee Board data showed that Chikkamagaluru, Kodagu and Hassan in Karnataka with 2,48,020 MTs during 2022-23 is the largest producer of Arabica and Robusta coffee. Kerala comes a distinct second at 72,425 MTs followed by Tamil Nadu at 18,700 MTs.
“The beginning of the rainy season started dry and was followed by below-average precipitation and temperatures in many major growing areas. While similar conditions reduced yields and output in the past two harvests, growers responded to higher coffee prices this year by picking as much as possible, including smaller, less profitable cherries. Bean exports are forecast to rebound by 1.8 million bags to 24.4 million due to higher available supplies,” the USDA report stated.
Official data revealed that India’s top export destination between April and November this year was the European Union, with Italy, Belgium, and Germany accounting for nearly half of total coffee exports. Other significant destinations included Russia, the UAE and the US, which together accounted for about 20 per cent of total exports. The US, Germany, France, Italy are the largest importers of coffee.
The European Union’s Deforestation Regulation (EUDR), aimed at preventing products sold in the EU from being sourced from deforested land, was scheduled for implementation in December. However, the European Parliament recently decided to extend the regulation’s timeline by another year.
Traders said that European buyers have been stockpiling coffee ahead of the regulation, which is expected to disrupt trade with several partners, including India.
According to the think tank Global Trade Research Initiative (GTRI), the EUDR is expected to impact India’s agricultural exports to the EU, valued at $1.3 billion, more severely than exports from competing countries due to India’s higher deforestation rate.
“Key products affected include coffee, leather hides and skins, oilcake, paper, paperboard, and wooden furniture,” GTRI said.
The think tank said that compliance with the EUDR and the EU’s Foreign Subsidies Regulation (FSR) will pose challenges for Indian exporters. Even when exporters are certain their products are not grown on deforested land, they must still meet the elaborate compliance requirements.
Unlike quality standards, where only the final product’s quality matters, the EU’s regulations impose complex compliance mechanisms, seemingly designed to increase the cost of imports and protect local producers, GTRI said.
India’s coffee exports rose to a record high of $1,146.9 million between April and November in FY24, compared to $803.8 million during the same period last year, registering a 29 per cent rise. (wikimedia commons) 
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