Indian coffee exports may fall 15% due to decreasing European demand

Country’s output may total 320,000 tons this crop year

Coffee exports from India, Asia’s third-largest grower, may decline by as much as 15 percent this year as inventories fall and the European credit crisis curbs demand, an exporters’ group said on Monday.

Shipments will drop from a record 346,850 metric tons in 2011, Ramesh Rajah, the president of the Coffee Exporters Association of India, said by phone from Bangalore. Domestic stockpiles have fallen after exporters boosted shipments in December to benefit from a decline in the rupee, he said.

Lower exports from India may help stem a decline in robusta coffee futures in London, which have slumped 32% since reaching a three-year high of $2,672 per ton on March 18. Weak demand and higher global supplies may spur a sharper decline in arabica futures, which lost 5.7% in 2011.

“The economic conditions in Europe are not looking good,” Rajah said.

“Italy, which is our largest buyer, is having problems. Greece, another major buyer, trouble.”

Economies in the euro region will contract 0.2% in 2012 from 1.6% growth last year, according to the median of 21 economist estimates compiled by Bloomberg. India exports around 70% of its total coffee output mainly to Europe.

“None of the buyers want to carry inventories and everybody is in the wait and watch mode,” Rajah said.

“Arabica coffee prices may remain around current levels, while robusta may drop 10% by March on a higher crop globally.”

Global robusta production will outpace demand by 2.5 million bags this season, according to Macquarie Group Ltd.

Output in Vietnam, the biggest exporter of beans used in instant drinks and espressos, will rise 9% to 21.25 million bags weighing 60 kilograms this season, according to a Bloomberg News survey conducted last month.

Arabica coffee for March delivery jumped 1.2% to settle at $2.2685 a

is also in pound on ICE Futures US in New York on December 30. Robusta coffee for delivery in March gained 0.2% to $1,810 a ton on NYSE Liffe in London on December 30.

India’s arabica exports climbed 6.9% to 54,103 tons last year, while robusta shipments increased 24.6% to 193,175 tons, the Coffee Board of India said on Monday.

Exports were valued at $1.05 billion in 2011 compared with $634 million a year earlier, the data from the board showed.

India’s coffee output may total 320,000 tons this crop year compared with a government estimate of a record 322,250 tons, Rajah said. Production was 302,000 tons last year, according to the board.

“The new coffee crop is just trickling in and will pick up pace by mid January or February,” Rajah said. Unseasonal rains in December delayed the new crop arrivals, he said.

Inventories are almost negligible this year compared to 40,000 tons carried over into the 2011, he said.

(Bloomberg) LABORERS DRY coffee beans in Coorg, India, last year. Global robusta production is expected to outpace demand this season.