March 22: The hoarding of the Arabica variety by growers at weekly auctions is likely to have a telling effect on coffee exports. According to sources, growers are now holding back the commodity at the weekly auctions in anticipation of obtaining better prices than the ones prevailing in international markets. ``By creating an artificial scarcity of the variety growers are trying to twist our arms,'' said a leading coffee exporter.``If the present trend continues there will be huge delays in export shipments. This will lead to defaults and reduced inflow of foreign exchange,'' said Nallamuthu, manager, Allana Sons Ltd, a leading coffee exporter in Bangalore. ``Growers are seeking a hike in Arabica prices which we cannot afford,'' he said.
``If the growers offer the Plantation A variety of washed Arabica for Rs 120 per kg, the export situation will improve to a large extent. Growers are seeking a price range of Rs 127 to Rs 132 for Plantation A. The international price of Plantation A is in the range ofRs 126 per kg.
There is, however, a silver lining to the issue. Once the monsoon sets in, the growers will be forced to sell the commodity at prevailing prices as they will not be able to stock the same. Added to this will be the fact that fresh stocks are also expected to come in by next month. ``Nobody wants to have a glut of the variety in the market. So we may see a change in the grower's stance in the forthcoming auctions,'' added Nallamuthu.
The weekly auctions conducted here on Thursday evoked good response from exporters compared to the last few weeks. The Arabica variety sold was about 36.05 per cent and Robusta 31.90 per cent. The quantity offered was 350,515 kg for Arabica and 242,705 kg of Robusta. According to sources in Karnataka Coffee Brokers Pvt Ltd, Thursday's auction saw good demand and traders were extremely bullish on washed Arabica. A section of the market feels that the ongoing situation may lead to the return of the Coffee Board in a big way wherein different rates may be set forthe export and domestic markets.
Following the announcement of the 100 per cent free sale quota system (FSQ), even small local players have to pay international prices, which will reduce consumption. ``For the last few months coffee consumption has been coming down drastically at the rate of 20 to 25 per cent. We are unable to change our maximum retail prices (MRP) in line with fluctuating international prices. This will reflect in lower bottomlines for small companies this fiscal,'' says MKC Srinivas Murthy, managing partner, Annapurna Coffee Works. Sundar PM of Modern Coffee also echoed the same sentiment saying: ``Local consumption is falling at the rate of more than 15 per cent. At this rate we may soon be forced to seek greener pastures.''
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
