With relevant institutional inputs and insights from senior coffee growers from Kodagu and Chikmagalur.
The mercurial policies of the President of the United States have finally hit the coffee industry. Coffee prices are on the rise after an unexpected announcement of a sweeping 50% tariff on imports from Brazil, the world’s largest coffee producer. As expected, this triggered a tumultuous surge in global commodities markets and set off fresh volatility in futures trading.
It may be recalled that the price of the commodity had declined by around 17% over the past month due to an improved harvest in Brazil, which led to increased supply. However, prices still remain nearly 18% higher than they were a year ago.
The reasons cited for the imposition of the tariff are nebulous – a mix of a former President’s alleged witch-hunt and the now familiar accusation of an unfair trade relationship between the USA and Brazil. A trader told the Financial Times that the announcement by the USA is “sending shockwaves across the coffee industry,” adding: “The US is Brazil’s main coffee buyer, so this tariff will certainly hit sentiment.”
“The problem is not to have tariffs between America and Europe,” said Giuseppe Lavazza, chair of the Lavazza Group, which owns Lavazza coffee, to the FT.
Lavazza reportedly said that while a 10% levy on EU goods was “fine,” tariffs on coffee-producing nations like Brazil and Vietnam would be more challenging for coffee companies and would inevitably raise prices for American consumers. As can be expected, while the immediate market reaction has been bullish due to concerns over supply disruptions, the tariffs could eventually curb US demand for Brazilian coffee, leading to a potential correction in prices. Of course, analysts feel the longer-term impact of the US tariffs remains uncertain.
The moot point for Indian coffee is how all of this will impact coffee prices – more specifically in Kodagu. Price speculation here is mostly manoeuvred, and to some extent manipulated, by traders and shipment fulfillment from Kerala. As reported earlier, greater transparency and timely reporting of price movements will assist coffee planters in making more informed decisions.
There was a time in Coorg when Senior Kodava Planters employed in Consolidated Coffee, BBTC and Independent Planters who held positions of authority at CPA volunteered and mentored small planters on best practices in running Coffee estates, provided plants from their nurseries and nudged the Coffee Research Station at Chettalli to make their work available to coffee planters at large. BBTC does not exist Coorg any more and for all practices the leadership that Consolidated Coffee played has disappeared post their take over and being rebranded.
The Kushalnagar Coffee Curing Works at Kudige was a bastion of integrity and reassurance for the planters. They made their margins but always at reasonable levels – no doubt pricing was entirely in the hands of a derelict and dysfunctional Coffee Board.
Whilst the Coffee Board has become more professional as they have to perform or perish – it would benefit the coffee growers immensely if they provided a daily chart on price movements- globally and locally. The local Traders and private Curing Works are having a field day in the absence of such transparent pricing norms.
What would be even better is definitive suggestions for value addition in local markets on the lines of what Colombian Coffee Growers Federation (FNC) did for their growers. The jury is out on the role of CPA and KPA as we see no guidance from these Planters Associations.
This is a time to exercise caution, understand trends and more importantly take inputs from “trustworthy and informed” traders. Given the changing weather patterns, explore value addition to the crop, supplement incomes from alternate sources (if you run a Homestay, offer better standards and realise improved pricing/quality of guests) and most importantly spend less than you earn. This is NOT the time to take loans if you can help it – non repayment has stringent consequences; even the possibility of the property being auctioned.