coffee prices hike
x

Coffee plantation

Coffee Chronicles: Understanding India's coffee price surge

With the global prices set to increase by 15-30 per cent, your morning cup of coffee is set to taste a lot more bitter. What's the impact of the rising cost of coffee in India, and what do the consumers and the farmers need to know?


India remains a small player in the global coffee market. In 2023, India's production was 3.74 lakh tonnes, with 2.98 lakh tonnes exported at an average price of $4,316 per tonne — a significant rise from $2,938 in 2020-21. Between April and September 2024, the average export realization surged to $5,322 per tonne. While this price increase has benefited exporters, the question remains whether rising prices will drive more investment into coffee production and expand cultivation in India.

Historical perspective on coffee prices

In an interview on Farm Matters, Vivian Fernandes spoke with M J Dinesh Devavrinda, Chairman of the Coffee Board of India, about the impact of rising coffee prices. Devavrinda recalled a similar price surge in the 1970s, but at the time, the market was controlled by the Coffee Board. Planters had a higher profit margin due to significantly lower input costs. Although current prices have risen sharply, the cost of production has also escalated, reducing profitability for farmers.

Also read: Study in US finds sedentary non-coffee drinkers at 60% higher risk of mortality

Supply and demand driving prices

Coffee prices are heavily influenced by global supply and demand dynamics. According to Devavrinda, Arabica coffee is traded in the New York market, while Robusta is traded in London. With higher demand and lower supply, prices have been rising.

One major factor affecting supply is climate change. Many coffee-producing countries, including Brazil, Vietnam, and Indonesia, have faced erratic weather patterns, such as unseasonal rainfall, droughts, and extreme temperature shifts, leading to lower-than-expected yields.

Also read: Single estate, fermented, barrel-aged, cold-smoked… coffee is going special

India's coffee production and challenges

India's 2023 coffee production was 3.74 lakh tonnes, a 22,000-tonne increase from the previous year. However, this year’s Arabica productivity has declined, while Robusta production remains stable. Excessive rainfall, particularly in regions like Wayanad, has negatively impacted output.

Although India exports 70-80 per cent of its coffee, pricing is largely dictated by global market trends. Indian exporters have seen an 80 per cent increase in average realisation from $2,940 per tonne in 2021 to $5,300 per tonne in 2024.

Will high prices encourage expansion?

With coffee prices at record highs, there is speculation about whether more land will be brought under coffee cultivation. However, Devavrinda noted that expansion is limited. The Coffee Board of India has laid out a 10-year roadmap to increase production to 6.5-7 lakh tonnes and export over 80 per cent of this output.

To achieve this, the board is focusing on:

Educating farmers about sustainable and high-quality coffee production.

Launching 'Indica Coffee', a premium Indian brand aimed at global recognition.

Promoting clonal plants, which retain the high-quality traits of parent plants and improve productivity by 30-50 per cent.

Developing coffee-specific fertilisers and micronutrients to enhance yield.

Challenges in coffee expansion

Unlike Brazil and Vietnam, where coffee is grown on flat land with high mechanisation, India’s hilly terrain and high labour costs pose challenges to productivity. Karnataka alone accounts for 70 per cent of India’s coffee production, with minimal expansion into new regions. However, there is growing interest in Northeast India, Odisha, and Andhra Pradesh for coffee cultivation.

To address productivity challenges, the Coffee Board is:

Developing tissue culture plants for higher yields.

Introducing agronomy best practices for efficient fertiliser use.

Encouraging mechanisation, despite India's unique topographical constraints.

Climate impact on coffee farming

Unpredictable monsoons and temperature fluctuations have made farming conditions more challenging. Devavrinda stated that monsoons, which previously followed a predictable schedule, have become increasingly erratic. Coffee farmers now face more frequent crop losses due to climate instability, leading to greater price volatility.

Additionally, human-wildlife conflict in coffee-growing areas is rising. In the Western Ghats, elephants, bison, and other wildlife encroach on farms, causing damage to crops and loss of human lives.

Coffee consumption trends in India and China

While India and China have traditionally been tea-drinking nations, coffee consumption is on the rise. Younger consumers are embracing coffee culture, particularly in urban areas. In China, coffee consumption has grown from 6 lakh bags in 2014-15 to 5.5 million bags today.

In India, café culture and the health benefits of coffee are fueling demand, particularly for instant and specialty coffees. The specialty coffee market is growing, with many Indian estates producing high-end coffee varieties for global markets.

Future of coffee farming in India

While rising prices have made coffee farming lucrative, many challenges remain. The government primarily supports small coffee growers, who account for 95 per cent of production. However, large estates face labor shortages and high production costs. The Coffee Board is exploring subsidies for mechanisation, collaborating with IIT Kharagpur to develop harvesting machines that could significantly reduce labor costs.

Devavrinda emphasised that for India to remain competitive, investment in technology, research, and branding is essential. The Coffee Board’s plan to increase exports and develop Indica Coffee could strengthen India’s position in the global market. However, whether new areas will be brought under cultivation remains uncertain.

(The content above has been generated using a fine-tuned AI model. To ensure accuracy, quality, and editorial integrity, we employ a Human-In-The-Loop (HITL) process. While AI assists in creating the initial draft, our experienced editorial team carefully reviews, edits, and refines the content before publication. At The Federal, we combine the efficiency of AI with the expertise of human editors to deliver reliable and insightful journalism.)

Read More
Next Story