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India's Coffee Exports May Slow on Rupee Gain, Brazilian Supply

30 March 2010 (Bloomberg)

Coffee exports from India, Asia's third-biggest producer, may slow in the next six months as a stronger currency makes shipments expensive amid an increase in supplies from Brazil, an exporters' group said.

Sales may expand by 15 to 20 percent in the year to Sept. 30, compared with 29 percent growth so far this season, Ramesh Rajah, president of the Coffee Exporters' Association of India, said in a telephone interview. Exports may total 200,000 metric tons, compared with 176,063 tons in 2008-2009, he said.

A drop in Indian supplies may help growers in Vietnam and Indonesia boost sales at a time when the U.S. and Japan, the world's largest and third-biggest importers, are recovering from recession. Production in Brazil, the largest grower, is forecast by Fortis Bank Nederland NV and VM Group to jump 10.4 percent to 53 million bags in 2010-2011 from the previous year.

"We've become expensive when demand is reviving in Russia and Europe after the recession," Rajah said. "Recapturing the market share in some varieties will become difficult as Brazil and Indonesia will have bigger crops."

Vietnam is the world's biggest producer of Robusta, used in instant coffees. Brazil dominates the market for Arabica beans, the milder-tasting variety favored by specialty roasters.

India's rupee climbed to its strongest level in 18 months today, making exports expensive, while Vietnam's dong has lost seven percent in the past six months, Bloomberg data show. The rupee has advanced 3.5 percent this year, the best among Asian currencies after Malaysia's ringgit and the Indonesian rupiah.

"We are also hit by rising freight costs at a time when Vietnam has kept its currency down," Rajah said. "It is going to be difficult to sustain the pace of exports growth."

Three-Month High

Futures for May delivery rose 2.4 percent to $1,371 a ton in London yesterday, the highest closing since Dec. 16. Prices have risen about 7 percent this month and futures may trade at $1,300 to $1,425 a ton in the next two months, Rajah said.

Arabica coffee may average $1.30 to $1.45 a pound over the next two months, he said. May-delivery futures added 1.7 percent to $1.3815 a pound yesterday in New York, after touching $1.3855, the highest price for a most-active contract since Jan. 27.

Tata Coffee Ltd. and its local rivals may still ship more than 200,000 tons this season because of a bigger domestic crop, Rajah said. Exports in the year started Oct. 1 totaled 112,511 tons valued at $245.7 million, compared with 87,380 tons a year ago, according to the state-owned Coffee Board.

India's production will rise to 289,600 tons this year, 10 percent more than a year earlier, the board said Dec. 14.

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