India Coffee Output May Drop on Rain, Cutting Exports

By Thomas Kutty Abraham

Nov. 10 (Bloomberg) -- India's coffee production, the third- biggest in Asia, may be less than a June forecast after excessive rainfall last month damaged the crop, an exporters' group said.

Output may drop 8 percent to 270,000 tons from 293,000 tons forecast by the state-run Coffee Board, lowering overseas sales, Ramesh Rajah, president of the All India Coffee Association, said in a phone interview from Bangalore.

Reduced supplies from India, which exports 80 percent of its output, may help support robusta coffee prices that have slumped 28 percent since July amid concern the global economy is sliding into a recession, curbing commodity demand.

``We have seen a 30 percent drop in orders this year,'' said Rajah. ``The decline in demand is a bigger worry for us at the moment than the fall in output. Nobody wants to take positions'' because of the credit crisis.

Robusta for January delivery gained $12 on Nov. 7 to $1,740 a ton on London's Liffe exchange. Prices may trade between $1,600 and $1,800 in the next six months, Rajah said.

Heavy showers in the nation's biggest coffee-growing states of Karnataka and Kerala in March and in October damaged crops. Robusta bean production may total 190,000 tons and arabica 80,000 tons, Rajah said. The government has forecast the robusta harvest at 193,000 tons and the arabica crop at 100,000 tons.

The U.S. Department of Agriculture last week estimated the country's total coffee output at 280,000 tons.

Export Prices

Tata Coffee Ltd. and other companies shipped 128,734 tons between April 1 and Nov. 6, compared with 125,507 tons a year earlier, according to provisional data compiled by the Coffee Board. Exports were valued at $348 million, 28 percent more than a year earlier, as prices rose.

Shipments this year may still be little changed from last year's 218,966 tons as demand for premium grades falls. Demand from Italy and Russia, the biggest buyers of Indian coffee, has declined from a year ago as a volatile currency made importers wary about striking new deals, Rajah said.

``The rupee's decline has partially offset the drop in coffee prices, but the volatility is putting off both the buyers and sellers,'' Rajah said.

India's rupee has fallen 17 percent this year against the dollar and is the second worst performer among Asia's 11 most traded currencies. The rupee rose today on speculation China's $586 billion spending plan will boost investor confidence in Asian economies.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.