India’s coffee export industry has achieved a significant milestone, with total exports crossing the $1 billion mark for the first time during the current financial year up to November. This development is backed by data from the Centre for Monitoring Indian Economy (CMIE).
Surge in Robusta Prices and EU Regulations
A report by The Indian Express attributes the growth in exports to two primary factors: the sharp rise in Robusta coffee prices, which dominate over 40% of global coffee production, and increased demand from European buyers stockpiling ahead of the European Union’s new Deforestation Regulation (EUDR). This regulation could raise the cost of coffee and other agricultural exports to the EU.
Record-Breaking Export Figures
India’s coffee exports reached an all-time high of $1,146.9 million between April and November in FY24, a 29% increase from $803.8 million during the same period last year. This figure is also nearly double the $460 million recorded in FY21.
Global Coffee Supply Challenges
Robusta coffee prices have climbed to multi-decade highs due to supply constraints in major coffee-producing nations like Vietnam and Brazil. According to the United States Department of Agriculture (USDA), drought and high temperatures in Brazil reduced both Arabica and Robusta yields. As a result, Brazil’s coffee bean exports are forecasted to decline by 2.6 million bags to 40.5 million, driven by diminished inventories from the previous year.
Meanwhile, Vietnam, the world’s second-largest coffee producer, has also faced production challenges. Although its coffee output is projected to increase by 2.6 million bags to 30.1 million, this figure remains below the record harvest of 2021/22.
India’s Coffee-Producing Regions
Coffee Board data highlights Karnataka as the largest producer of Arabica and Robusta coffee, contributing 2,48,020 metric tonnes (MT) in 2022–23. The state’s key producing regions include Chikkamagaluru, Kodagu, and Hassan. Kerala ranks second with 72,425 MT, followed by Tamil Nadu at 18,700 MT.
EU’s Deforestation Regulation and Its Impact
The European Union’s Deforestation Regulation (EUDR), aimed at ensuring products sold in the EU are not sourced from deforested land, was set for implementation in December. However, its timeline has been extended by one year.
European traders have reportedly stockpiled coffee in anticipation of the regulation, which is expected to disrupt trade with several exporting countries, including India. According to the think tank Global Trade Research Initiative (GTRI), the EUDR could disproportionately affect India’s agricultural exports to the EU, valued at $1.3 billion, due to the country’s higher deforestation rate.
Compliance Challenges for Indian Exporters
GTRI notes that compliance with the EUDR and the EU’s Foreign Subsidies Regulation (FSR) poses significant challenges. Indian exporters must meet stringent compliance requirements, even if their products are not sourced from deforested land. Unlike traditional quality standards, these regulations impose detailed mechanisms that increase import costs, potentially favouring local EU producers.
Key Export Markets
The European Union remains India’s largest coffee export destination, with Italy, Belgium, and Germany accounting for nearly half of total exports between April and November this year. Other prominent markets include Russia, the UAE, and the US, which collectively made up around 20% of India’s coffee exports.
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