Why Coffee prices increased by 15-30% in India

Hyderabad: Coffee prices in India have skyrocketed, with a rise of 15-30% in local markets. This price increase is high in the coffee-growing regions of southern India, which supply the bulk of the country's coffee.

Global coffee prices have been surging in the last one year. Coffee production has dropped due to poor weather conditions in Brazil and Vietnam.

Indian coffee prices have risen, particularly in Karnataka, the country's largest coffee producer. With prices rising 15 to 30%, local farmers and exporters are making profits but consumers are already feeling the pinch as their daily cup of coffee becomes pricier.

Coffee in India

India consumes 1 lakh tons of coffee internally. Earlier this month, prices of coffee in Karnataka have shot up. In Kodagu, Chikkamagaluru, and Hassan, the prices of coffee beans have reached dizzying heights, impacting both local consumers and exporters. Karnataka is India’s largest coffee-producing state, accounting for around 70% of the country’s total coffee production. Coffee in India is largely grown in two varieties, namely Arabica and Robusta, with Karnataka being a major producer of both.

Price rise

A 50-kilo bag of Arabica, which was priced at around Rs 20,000 last month, now costs Rs 25,000. The price of Robusta, which is sold as a filler in place of Arabica, has doubled from Rs 10,000 per bag to Rs 20,000. Experts say that these substantial price increases are linked to crop losses in Brazil and Vietnam, two of the world’s largest coffee producers, which in turn affect international coffee prices as well as Indian coffee. It is not just Brazilian coffee plantations, which mostly produce Arabica beans that have been hit by bad weather. Robusta supplies are also set to shrink after plantations in Vietnam, the largest producer of that variety, also faced both drought and heavy rainfall.

Coffee-World’s Second Most Traded Commodity

Coffee is the world's second most traded commodity by volume, after crude oil, and its popularity is increasing. Consumption in China has more than doubled in the last decade. The upward trend in coffee prices is expected to persist for some time.

Reasons for price increase

Local farmers have cited the increase in input costs, such as fertilizers and labor, as additional reasons for the rising prices. Furthermore, coffee is increasingly being viewed as a premium product, with consumers willing to pay higher prices for specialty coffee. This trend is also fueling the rise in prices as demand outstrips supply.

The cost of labor, equipment, and fertilizers has been rising steadily every year. Earlier, many plantations just did not harvest the coffee cherries due to labor shortages. Until now, the price of the crop had not kept pace with these rising costs. But this year, with the recent price surge, things are looking up.

The last time coffee prices reached such a high was in 1977. The imbalance between demand and supply chains is the major reason for this. Prices may continue to rise for a few months, but once they stabilize, they are unlikely to see another sharp increase for a long time.

India produces 4% of the world’s coffee. European countries are the major consumers, buying almost 40% of India’s exports. But prices can stabilize since the crop is dependent on weather conditions and these can improve. The coffee crop in Brazil was affected by high temperatures during the setting, drought, unseasonal rains, and an already affected frost situation.

However, higher coffee prices are good news to those planters who want to return to their coffee plantations and there are long-term profits to be made.

Indian consumers

For Indian consumers, the rising coffee prices mean that they may switch to tea or drink less.