Voluntary Report - public distribution

**Date:** 10/30/2008

**GAIN Report Number:** IN8128

IN8128

**India**

**Coffee**

**Update**

**2008**

**Approved by:**

![](media/image1.wmf)Holly Higgins

U.S. Embassy

**Prepared by:**

A. Govindan

**Report Highlights:**

The MY 2008/09 coffee production estimate is revised marginally downward
to 4.7 million bags due to uneven rainfall distribution in major growing
regions. The rapid growth in local cafe chains has led to an increase in
domestic coffee consumption in recent years. Coffee exports in MY
2008/09 could decline marginally due to the global financial crisis and
economic slowdown.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Trade Report

New Delhi \[IN1\]

\[IN\]

**Production**

Although the Indian Coffee Board's Post Blossom Estimate pegs 2008/09
coffee production at 293,000 tons or 4.9 million 60-kg bags (100,000
tons Arabica and 193,000 tons Robusta), this is likely to be revised
marginally downward because of uneven rainfall later in the season
affecting berry setting. Consequently, Post revises production downward
to 280,000 tons (4.7 million 60-kg bags), which would include 190,000
tons Robusta and 90,000 tons Arabica), compared with 262,000 tons in MY
2007/08.

Coffee bearing area has shown a steady expansion over the past several
years, with most of the increase in Robusta. In areas where both Robusta
and Arabica can be grown, farmers prefer Robusta because of higher
yields and less risk of pest infestation, particularly the more
dangerous white stem borer. In recent years, there has been an expansion
of coffee plantation, mostly Robusta, in the non-traditional coffee
growing states of Andhra Pradesh and Orissa.

The average size of coffee holdings in India is about 1.8 hectares, with
small holdings (less than 10 hectares) accounting for almost 75 percent
of the total holdings and accounting for 70 percent of coffee
production. The cost of production of coffee is increasing because of
the higher cost of labor, fertilizer, and petroleum products.
Mechanization in Indian coffee plantation is difficult because of the
uneven terrain.

**Consumption**

Domestic coffee consumption is growing and is expanding into
non-traditional consuming regions in northern India, due in part to a
surge in coffee bars in major cities in recent years. For example, the
Café Coffee Day, a leading chain, with about 660 stores, is on an
expansion spree, opening around 25 stores every month. Costa Coffee, one
of the UK's most popular coffee retail chains, plans to have 300 outlets
in India in four years, up from 42 currently. Other coffee cafe chains
in India include Barista Coffee, Café Mocha, and Qwiky's. The demand for
coffee making machines is also reported to be increasing although
several new players in this field are not well versed in coffee making.
India plans to subsidize the cost of processing more coffee domestically
to increase the country's roasting capacity. According to the
Chairperson of the state owned Indian Coffee Board, the government will
pay 25 per cent of the cost of equipment, including transportation and
duties, to build roasting capacity. Coffee consumption in CY 2007 is
estimated at 90,000 tons and is expected to increase to 95,000 tons in
CY 2008.

Farm-gate prices of coffee in major producing centers increased steadily
in 2008 reaching Rs. 5,194 (\$106) per 50 kg for Arabica parchment and
Rs. 5,188 (\$105.9) per 50 kg for Robusta parchment at Chikamangalur in
July, an increase of around 30 and 45 percent receptively over a year
ago. Retail prices of coffee powder also registered a significant
increase in 2008, reaching Rs. 240 per Kg (\$2.2 per pound) in July
compared to Rs. 200 a year ago.

**Trade**

Coffee exports (including re-exports) from India in MY 2007/08, based on
export permits issued by the Coffee Board, are estimated at around
231,000 tons valued at \$ 586.3 million against 219,796 tons valued at
\$444.8 million in MY 2006/07. Exports include about 70,000 tons of
Arabica, 112,000 tons of Robusta, and 49,000 tons of soluble coffee.
Major export markets for Indian coffee were Italy, Russia, Germany,
Belgium, Spain, Finland, Ukraine, Jordan, Croatia, and Slovenia.
According to trade sources rising freight costs and higher domestic
transportation costs are hurting coffee exports. There is some
apprehension that the current global financial crisis and economic
slowdown could affect coffee exports from India in MY 2008/09. European
roasters who account for bulk of India's Arabica shipments are
reportedly delaying contracting for this year's purchases. Post
currently forecasts MY 2008/09 exports at 225,000 tons.

**Miscellaneous**

The Indian Coffee Board Chairperson, Mr. G.V. Krishna Rau, was
unanimously elected Chairperson of the Executive Board of the
International Coffee Organization for 2008-09. One of his major tasks
will be to oversee the transition from the International Coffee
Agreement of 2001 to the 2007 Agreement.

The Coffee Board in association with coffee industry stakeholders
including growers, roasters and exporters will host the India
International Coffee Festival 2009 in Bangalore during March 5-8, 2009.

**Table 1: Commodity, Coffee, PSD**

  -------------- --------------- ------ ---------- --------------- --- ---------- --------------- --- ---------- ----------
  **Coffee,      **2007**                          **2008**                       **2009**                       
  Green India**                                                                                                  

                 **2006/2007**                     **2007/2008**                  **2008/2009**                  

                 **Market Year                     **Market Year                  **Market Year                  
                 Begin: Oct                        Begin: Oct                     Begin: Oct                     
                 2006**                            2007**                         2008**                         

                 **Annual Data          **New      **Annual Data       **New      **Annual Data       **Sep**    
                 Displayed**            Post**     Displayed**         Post**     Displayed**                    

                                        **Data**                       **Data**                       **Data**   

  Area Planted   355             355    381        0                   384        0                   387        (1000 HA)

  Area Harvested 329             329    343        0                   342        0                   343        (1000 HA)

  Bearing Trees  545             545    545        0                   550        0                   555        (MILLION
                                                                                                                 TREES)

  Non-Bearing    75              75     75         0                   75         0                   70         (MILLION
  Trees                                                                                                          TREES)

  Total Tree     620             620    620        0                   625        0                   625        (MILLION
  Population                                                                                                     TREES)

  Beginning      1812            931    1812       2228                2228       1981                1661       (1000 60
  Stocks                                                                                                         KG BAGS)

  Arabica        1662            1415   1662       1542                1542       1583                1500       (1000 60
  Production                                                                                                     KG BAGS)

  Robusta        3138            3250   3138       2825                2825       3167                3167       (1000 60
  Production                                                                                                     KG BAGS)

  Other          0               0      0          0                   0          0                   0          (1000 60
  Production                                                                                                     KG BAGS)

  Total          4800            4665   4800       4367                4367       4750                4667       (1000 60
  Production                                                                                                     KG BAGS)

  Bean Imports   700             400    700        700                 400        700                 400        (1000 60
                                                                                                                 KG BAGS)

  Roast & Ground 0               0      0          0                   0          0                   0          (1000 60
  Imports                                                                                                        KG BAGS)

  Soluble        0               0      0          0                   0          0                   0          (1000 60
  Imports                                                                                                        KG BAGS)

  Total Imports  700             400    700        700                 400        700                 400        (1000 60
                                                                                                                 KG BAGS)

  Total Supply   7312            5996   7312       7295                6995       7431                6728       (1000 60
                                                                                                                 KG BAGS)

  Bean Exports   2598            2500   2598       2720                3023       2850                2890       (1000 60
                                                                                                                 KG BAGS)

  Rst-Grnd Exp.  7               5      7          10                  7          10                  10         (1000 60
                                                                                                                 KG BAGS)

  Soluble        1059            950    1059       1100                820        1140                850        (1000 60
  Exports                                                                                                        KG BAGS)

  Total Exports  3664            3455   3664       3830                3850       4000                3750       (1000 60
                                                                                                                 KG BAGS)

  Rst,Ground     1170            1200   1170       1224                1224       1300                1300       (1000 60
  Dom. Consum                                                                                                    KG BAGS)

  Soluble Dom.   250             240    250        260                 260        280                 300        (1000 60
  Cons.                                                                                                          KG BAGS)

  Domestic Use   1420            1440   1420       1484                1484       1580                1600       (1000 60
                                                                                                                 KG BAGS)

  Ending Stocks  2228            1101   2228       1981                1661       1851                1378       (1000 60
                                                                                                                 KG BAGS)

  Total          7312            5996   7312       7295                6995       7431                6728       (1000 60
  Distribution                                                                                                   KG BAGS)
  -------------- --------------- ------ ---------- --------------- --- ---------- --------------- --- ---------- ----------