While the conflict between Russia and Ukraine has slowed shipments of instant coffee, a global supply crunch and resulting price spike has spurred exports of unroasted green coffee beans from India. The ICE coffee futures benchmark, based on the premium Arabica variety, has fallen to $2.15 a pound after hitting a 10-year high of $2.60 in February. Indian coffee exports contracted when prices rose and are now being shipped.

From January 1 to April 27, 2 exports rose 25 per cent to 148,402 tonnes from the same period last year, according to the Coffee Council. Ramesh Rajah, president of the Coffee While exports are likely to slow after June, when Brazil, the world’s largest coffee producer, starts harvesting, Rajah said delayed shipments could benefit India.

In its forecast for the upcoming coffee season earlier this year, Brazil’s national supply company Conab estimated 2022/23 coffee production at 55.7 million bags of 60 kg each. This is a 16.8 per cent increase from 2021 as the country enters a “year-over-year” big production in the biennial Arabica coffee production cycle. However, this forecast is down from a record 63 million bags in 2020.

India is now exporting the Robusta variety, the country’s main coffee crop. According to growers, the production of premium Arabica is well below the 99,000 tonnes forecast by the Coffee Council. Most have been exported to take advantage of higher prices. The Coffee Council estimates Robusta production at 235,000 tonnes in 2021-22.

“Arabica coffee is selling for up to Rs 16,000 per 50 kg bag this year, compared to Rs 9,000-10,000 last year. Unfortunately, growers are not able to profit from it due to low volumes. Robusta has a much better harvest, but Probably 20 per cent lower than last year. Robusta price level is almost similar to last year,” said Karnataka Growers Association chairman N Ramanathan.

Typically, India has to compete with second-largest coffee producers Vietnam and Indonesia, which have found cheaper buyers for their coffee in Europe. But now these countries are grappling with high shipping costs in Europe. In contrast, shipping rates from India to Europe are lower.

Shipments of instant coffee took a hit after the Russian-Ukrainian war broke out in February. India exports about 40,000 tons of instant coffee, and Russia is a big buyer. A major post-war change is that several big exporters of instant coffee that valued imported beans and exported are now turning to the local market, as imports were affected, said an executive of a large coffee exporting company. Weak rupee and shipping delays.

Coffee beans are imported and re-exported duty-free, but are subject to a 110 per cent duty when used in the local market. Large exporters such as CCL Ltd and Tata Coffee Ltd, the two largest instant coffee exporters, import large quantities of coffee beans for export.

Multinationals such as Nestlé India Ltd. and Hindustan Unilever Ltd. use Indian coffee beans to sell brands such as Nescafé and Bleu domestically. This coffee year (October 2021-September 2022) is expected to exceed production by 3.1 million 60kg bags, according to the latest medium-term outlook from the International Coffee Organization.

The organisation expects world coffee consumption to grow by 3.3 per cent in 2021/22 to 170.3 million bags, compared to 164.9 million bags the previous year. It added that supply and demand could be affected by changes due to a downturn in the world economy, rising input costs and the conflict in Ukraine.