The cup that does not cheer

By TheHindu on 18 Nov 2016 | read

The decline in the demand for coffee beans in the international market has resulted in falling prices in the domestic market as well, leaving the coffee growers worried. The price of Arabica coffee has declined by almost 50 per cent from last year. According to coffee planters, the price went up to Rs. 11,000 per bag of 50 kg last year. The planters earned Rs. 9,000-Rs. 10,000 per bag last year. This time the price stands around Rs. 6,300 per bag.

Karnataka covers over 66 per cent of the total coffee cultivation area in the country and in terms of production it contributes 70 per cent. Apart from planters, a large section of the working class is dependant on coffee cultivation in the districts of Hassan, Chikmagalur and Kodagu.

As on February 20, Arabica coffee was purchased by major procurers in Hassan, Kodagu and Chikmagalur at Rs. 6,375 per bag. This is less than the actual cost the growers put into growing one bag of coffee beans. K.N. Pradeep, president of the Karnataka Growers’ Federation, said that the cost of coffee bean production was over Rs. 7,000 per bag (50 kg), considering the increasing labour charges. “A labourer has to be paid around Rs. 250 per day. And, the labour cost covers 80 per cent of the production cost. Going by the present price, we are selling our crop for a loss”, he said.

The planters attribute the dip in prices to the moves of the big players in the international market. The big four coffee roasting companies — Kraft, Nestle, Procter & Gamble, and Sara Lee — rule the New York market of Arabica. “They play a major role in the coffee sector. More than 80 per cent of coffee beans grown in India is exported. Naturally the role of these buyers has its impact on the growers worldwide”, Mr. Pradeep said.

Robusta growers are in a slightly better position than Arabica growers. The price of Robusta is stable compared to prices in previous years. Former member of the Coffee Board B.A. Jagannath accuses the major players of ‘unholy business tactics’ for the crash in prices. The major companies keep a good stock of the produce by procuring them at a low price and release it into the market when the price increases. “They are the major gainers in a situation like this. They stock the goods and create demand for it later”, he alleged. However, he feels, the present situation is temporary as the price might go up in the next harvest season as the production is expected to come down considering the untimely rains.

Parts of Hassan received untimely rains in the last 15 days. This may affect the quality of coffee beans and the quantity of production as well. Besides this, the growers are bound to minimise expenditure on the farm this year. Mr. Pradeep said, “As a grower I have cut spending on labour, manure and other maintenance in the farm. I will think of minimising the labour strength. These measures will affect the socio-economic condition of those depending on coffee”.

Mr. Jagannath said that the coffee planters would be worried over repaying loans rather than concentrating on the crop in the fields. “These developments will affect production in the next harvest. If the production comes down, there are chances of prices going up,” he said. The worst affected would be the small growers with limited land holdings. They cultivate coffee by taking loans and they would be at a loss when they do not get a good price.

B.R. Manjunath, a planter with three acres of coffee crop, said that he had taken a bank loan. “Labour cost in a coffee estate is very high. I am not sure of getting back what I spent this year. I hope at least in the next harvest I get a good price”, he said.

The dip in price of coffee beans is not going to benefit the end consumer as the price of coffee served in hotels has not come down. However, the growers get a very small share in the price at which a cup of coffee is sold in food joints. “If a cup of coffee is sold at Rs. 100 in popular food joints, growers get only Rs. 5 of it. The middlemen (multi-national companies) are the major beneficiaries in the coffee trade”, opined a planter.

There have been concerted efforts by planters for a fair trade in coffee. “Whenever the prices declined the multinational companies made a profit. They have a responsibility to ensure a fair share for the growers. To achieve this, efforts have to be made at the international level”, Mr. Jagannath said.

Sathish G.T.

Coffee planters are a worried lot as prices are down