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Indian coffee overview.

Indian Coffee Overview

India's coffee exports have declined for the 1990-91 fiscal year, ending March 31 and the subcontinent's coffee production, while improved over the 1989-90 year, is unlikely to hit the target set by the Commerce Ministry's Coffee Board, which administers the coffee trade in this nation of 844 million people.

That's the word from M.P. Dautani, the officer in charge at the Coffee Board's New Delhi office.

At the same time, however, there's a glimmer of hope for India's coffee business, an important earner of foreign exchange Most Indian coffee is grown by small farmers in the southern states of Karnataka, Kerala and Tamil Nadu; and these farmers have not only found "the market at its lowest ebb now," according to Dautani, but are also fighting an invasion of the deadly berry borer, a pest that could wipe out coffee farms.

The good news for the industry - if not for the southern farmers - is that coffee cultivation, encouraged by the Coffee Board, is poised for a forward leap in India's northeast, a "non-traditional" coffee area which has suitable temperatures, plenty of rain and the elections needed for coffee growth.

The production figures for 1990-91 aren't complete, but Dautani says output will amount to 173,000 metric tons, of which about 60,000 tons will be "internally consumed" - meaning in India - and the rest will be exported, with the Soviet Union far and away the biggest customer.

That compares to 1989-90 production of 130,000 tons, which was down more than a third from the record 1988-89 output. The Coffee Board had expected the current crop to rebound to more than 200,000 metric tons, noting that coffee production tends to run in biennial cycles. Lower coffee prices, due to the disintegration of the International Coffee Organization's quota system, may have had some effect, says Dautani, though he adds that "the quota system was not effective" so far as India was concerned, since ICO non-members in the Soviet Bloc have been among India's biggest export customers.

Exports Drop

The full 1990-91 figures aren't in yet, but through January, Indian coffee exports dropped to 87,134 metric tons valued at $120 million against 113,464 tons valued at about $160 million for the corresponding period in 1989-90. Though India's Government had fixed a goal of $200 million for coffee exports in the 1990-91 year, the Coffee Board had already suggested that this target be lowered to $140 million.

Currently, most of the 248,000 hectares devoted to India's coffee are in Karnataka (65%), Kerala (25%), with much of the rest in Tamil Nadu, according to Dautani. Up to now, only 6,879 hectares are under cultivation in the seven states of the northeast - Nagaland, Assam, Mizoram, Tripura, Meghalaya, Arunachal Pradesh and Manipur.

But reports from Agartala in Tripura State say the Coffee Board has set up a coffee research station and four "demonstration farms" in the northeast to boost coffee cultivation and to help small farmers get started, usually with some sort of subsidy.

Dautani says the bulk of India's coffee growers - unlike the country's tea growers - are small farmers "with up to 10 hectares, running family businesses."

A 1988 Coffee Board census showed there were 119,940 coffee "estates" in the subcontinent, with 112,607 of them under four hectares, 5,183 between 4 and 10 hectares and 2,150 larger than 10 hectares. Indian coffee comprises around 3% of the world crop and tends to be slightly more than half Arabica with the rest Robusta.

Domestic consumption "has not kept pace with increased coffee production," according to a U.S. Embassy Foreign Agricultural Service report, "largely as a result of increased use of chicory as a dilutant or substitute for coffee," with around 40,000 metric tons of chicory mixed with coffee annually.

Up until recently, coffee has been an expensive drink in India, but since the abandonment of quotas, the domestic retail prices of coffee have actually fallen below tea, according to the report. It adds, however, that there's been a "significant increase in instant coffee consumption in the past two years," though India's per capita consumption of "around 1.0 kilo continues to be very low compared with an average of 3.0 kilos in most coffee-consuming nations."

Dautani says at least 45% of all coffee exports from India go to the Soviet Union, while the U.S. report says U.S.S.R." purchases more than 50% of India's coffee.

For 1989-90, the U.S. Embassy report shows a total of 115,056 metric tons exported by India, with the USSR taking 56,869 tons, followed by the U.S. (11,624), W. Germany (8,416), Italy (8,124), Yugoslavia (7,833), Japan (4,152), Czechoslovakia (3,417), Kuwait (1,693), Romania (1,588) and "all other (11,340).

The Soviets, who've recently signed a new, five-year trade agreement with India, tend to pay a slightly higher price for coffee beans, around 87 [cents]/lb., according to Dautani. He says the Soviets are now going for the recently developed Indian instant coffee in amounts of 10,000 to 12,000 tons yearly. The Indian Government provides cash subsidies on "value-added" items such as instant coffee - 20% for 100-gram packs, 18% for bulk export.

Western diplomatic sources note that the Soviet-Indian trade agreement is a "rupee-ruble exchange" with "a leakage of foreign exchange to India." Though the Indian rupee is not as "stable" as many foreign currencies, it is probably much more stable than the ruble and Western sources say there's alot of "pulling and hauling about trade terms" affecting the coffee commerce.

Coffee first came to India in 1670 when a Moslem religious leader returned from Mecca with seven coffee seeds and planted them in the hills of Karnataka. Britain's East India Co. started an experimental farm in the early 1800's in Kerala which blossomed into a thriving business.

Marketing is the chief function of the Coffee Board, which provides research, quality control, processing and storage so that private traders don't get their hands on the coffee until it is shipped from the the West Indian ports of Bombay (mainly), Mangalore or Cochin, according to Dautani. The Board's head office is in Bangalore but it has branches around the nation

ITC, Ltd., and Ramesh Enterprises are the two biggest Indian coffee exporters, says Dautani, while Brooke Bond, with a 51% market share, and Nestle's, with a 43% market share, dominate India's retail coffee market.
COPYRIGHT 1991 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Steif, William
Publication:Tea & Coffee Trade Journal
Date:Jul 1, 1991
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