Date:08/02/2006 URL: http://www.thehindubusinessline.com/2006/02/08/stories/2006020801651200.htm

Back Tight supply situation in global market — Coffee growers getting rid of old stocks

M.R. Subramani

Buyers offer resistance as they feel farm-gate prices are high
But things are expected to be better once arrivals increase
Rise in permits issued for exports

Chennai , Feb. 7

A TIGHT supply situation in the global coffee market has helped domestic growers to get rid of their old stocks even as arrivals of the new crop have begun to improve.

"The old crop is getting cleared in view of a tight supply situation. Growers too have benefited from the current prices, which are 25 per cent higher than the rates during July-August," according to sources in the plantation industry.

"Most of the old crop has been cleared but there is still resistance from buyers in view of high prices," said Mr A.K. Bhandari, former president of the United Planters' Association of Southern India.

"There is some demand in the international market and we expect shipments to take place this month and March. But buyers feel the prices are high," said Mr Ramesh Rajah, President, Coffee Exporters' Association of India.

Currently, arabica parchment is quoted around $2,510 a tonne and robusta cherry AB at $1,400 a tonne. These prices are lower than the rates that prevailed a week ago.

Prices down on sales: Coffee prices after rising last week have taken a beating this week on sales by speculators. On Tuesday, robusta for March delivery was quoted at $1,161 a tonne, while in New York, arabica opened lower at $1.132 a pound.

While growers are looking for a premium of $160 for robustas, they are willing to offer a discount of 2-3 cents for arabicas. On the other hand, sellers are ready to offer a premium between $130 and $140 for robustas and seeking 5 cents discount for arabicas, according to Mr Rajah.

In the global market, Indian robustas command a premium which sometimes can be around $200 a tonne, while arabicas are sold at discount.

"The gap between the sellers' demand and buyers' offer is not very big. Though farm-gate prices are above parity, we can expect some balance once arrivals gather pace," Mr Rajah said.

Currently, farm-gate price for plantation A is around Rs 4,300 for a 50-kg bag, while for robusta cherry, it is Rs 2,300.

"Robusta prices are higher as arrivals are yet to begin. They are expected by the end of this month," Mr Bhandari said.

Arabica lower: As arrivals have begun, planters say the arabica crop is lower than their expectations, while robusta could turn out to be better.

"Planters are reporting 20-25 per cent less crop than what they had expected initially in the case of robustas," Mr Bhandari said. "Overall, the production could match the Coffee Board's revised estimates, though figures of arabica and robusta could vary," he said.

The Coffee Board, in its revised estimate, has projected the crop at 2.81 lakh tonnes this season (November 2005-October 2006) from the initial estimates of 2.94 lakh tonnes and 2.75 lakh tonnes last season.

The good demand is also reflected in the permits issued for exports this year. As per the Coffee Board's statistics, permits this year till February 1 have been issued to ship 14,157 tonnes compared with 11,777 tonnes during the same period a year ago.