Date:04/05/2005 URL: http://www.thehindubusinessline.com/2005/05/04/stories/2005050402661200.htm

Back `Coffee production likely to be lower till 2007'

G.K. Nair

Kochi , May 3

LOW prices of coffee in the world market during the past four years have forced the planters to cut costs, leading to a drop in production which is likely to continue up to 2007, according to Mr Anil Kumar Bhandari, President, UPASI.

During the past four years, cost structure has radically changed. High input costs such as fertilisers and pesticides, when the coffee prices were ruling at rock bottom, forced planters to cut costs, which in turn reduced the use of fertilisers etc.

"Planters who were apply fertilisers three to four rounds reduced it to two rounds. This resulted in a negative impact on the productivity," Mr Bhandari told Business Line. On the other hand, due to the uncertainty in prices "no new areas were brought under coffee now," he said.

The world consumption at the same time is expected to be 116 - 117 million bags of 60-kg against a production of 114-115 million bags, he said. Besides, there is a "slight increase in the consumption now, which is expected to grow as some new markets would open up in the coming years." According to him, markets in China and East European countries are slowly opening up.

At present even in India, coffee is mainly consumed in the South. In the other parts of the country, the demand has already started picking up. This, in turn, would push up the domestic demand gradually in the near future, he predicted.

Domestic production which was at 2,28,300 tonnes in 1997-98 rose to 3,01,200 tonnes in 2000-01. Thereafter, it declined to 2,70,000 tonnes in 2003-04 and then moved up to 2,90,400 tonnes in 2004-05.

Exports last fiscal is estimated to be less than two lakh tonnes against 2,32,684 tonnes in 2003-04, Mr Bhandari said. However, it is expected to move up in the current fiscal because of short supply from other producing countries especially Vietnam, he said.

The prices for arabica parchment went up to Rs 123.75 a kg on April 13, and thereafter, it declined marginally. However, futures prices showed that the drop might not be tangible. Prices for May delivery was 111.05 cents/lb, July 114.10 cents/lb, while for September it was 116.50 cents/lb.

According to Mr Bhandari, "if the prices remained at 120 cents to 140 cents/lb it would be relatively remunerative."