India’s Coffee Exports Hit Record $1 Billion, Driven by Robust Global Demand

India, traditionally a tea-exporting country, is making significant strides in the global coffee export market. Coffee exports from India surged to an all-time high of $1.146 billion between April and November of FY24, a 29% increase compared to $803.8 million during the same period last year, according to data from the Centre for Monitoring Indian Economy (CMIE). This figure is more than double the $460 million recorded in FY21.

Key Factors Behind the Growth

The sharp growth in exports is largely attributed to skyrocketing Robusta coffee prices, which have surged due to supply constraints in major coffee-producing countries like Vietnam and Brazil. Robusta, which accounts for over 40% of global coffee production, saw its price peak at $4,667 per metric ton in June 2024, marking a 63% rise this year.

Additionally, Indian exporters benefited from stockpiling by European buyers ahead of the European Union’s new Deforestation Regulation (EUDR). This regulation, aimed at preventing imports of goods sourced from deforested lands, is expected to increase compliance costs and disrupt trade.

Indian Coffee’s Premium Market Position

Indian coffee has captured the “premium segment” of the export market, unlike tea, which has seen stagnant export growth despite opportunities arising from Sri Lanka’s economic crisis.

Declining Production in Leading Coffee Producers

Brazil and Vietnam, the world’s top coffee producers, have reported reduced yields due to adverse weather conditions. Brazil’s coffee bean exports are forecast to drop by 2.6 million bags to 40.5 million, while Vietnam’s production is recovering but remains below its record levels.

In India, Karnataka leads in coffee production, accounting for the largest share with 248,020 metric tons of Arabica and Robusta in 2022-23, followed by Kerala (72,425 MT) and Tamil Nadu (18,700 MT).

Export Destinations

The European Union remains India’s top coffee export destination, with Italy, Belgium, and Germany accounting for nearly half of total exports. Other key markets include Russia, the UAE, and the US.

Challenges from EU Regulations

The EU’s Deforestation Regulation (EUDR), initially set for December 2024 implementation, has been deferred by a year. Despite this, traders warn that compliance will remain a challenge for Indian exporters. The regulation requires products to meet stringent standards to prove they are not sourced from deforested land.

According to the Global Trade Research Initiative (GTRI), the EUDR could significantly impact India’s agricultural exports to the EU, including coffee, valued at $1.3 billion. GTRI also highlighted that compliance with EUDR and the EU’s Foreign Subsidies Regulation (FSR) will increase costs for Indian exporters, potentially giving an edge to competitors with lower deforestation rates.

While India’s coffee exports have seen record growth, challenges like compliance with international regulations and fluctuating global demand could shape the future of the industry. However, the country’s ability to capture the premium export market signals promising prospects for Indian coffee on the global stage.