Changing Direction and Magnitude of India’s Coffee Export in the Post-Liberalization Era

Coffee is of global importance, ranking second to petroleum in the world commodity trade. Moreover, coffee is of particular importance as a major export commodity in many low-income and developing countries in Latin America, Africa and Asia. Coffee was one of the first commodity in which control over world trade was attempted. Brazil, producing from 75 to 90 percent of the world’s coffee in the early 1900’s, led Columbia and other Latin American countries to a series of producer-country agreements to control exports and raise world prices from 1902 until the first International Coffee Agreement was signed in 1962. This agreement represented a major change in the world coffee market since major coffee importing countries (including the USA) also became signatories. The International Coffee Agreement (ICA) is an international commodity agreement aimed to achieve a reasonable balance between the supply and demand of coffee. Export quotas are the principal instruments used. The original agreement was signed in 1962 for a five-year period, and since then there have been five subsequent agreements, ratified in 1968, 1976, 1983, 1994, and 2001. International Coffee Organization (ICO) exporting members account for over 97 percent of world coffee production and its importing members are responsible for around 80 percent of world coffee consumption. The coffee industry currently has a commodity chain that involves producers, middlemen exporters, importers, roasters, and retailers before reaching the consumer. Middlemen exporters often referred to as coffee “coyotes,” purchase coffee directly from small farmers. Large coffee estates and plantations often export their own harvests or have direct arrangements with a transnational coffee processing or distributing company. India is the sixth largest producer of coffee in the world, accounting for over four percent of world coffee production, with the bulk of all production taking place in its Southern states. It is believed that coffee has been cultivated in India longer than anywhere outside of the Arabian Peninsula. Indian coffee is said to be the finest coffee grown in the shade rather than direct sunlight anywhere in the world. There are approximately 250,000 coffee growers in India, 98 percent of them are small growers. Almost 80 percent of the country’s coffee production is exported. Of that which is exported, 70 percent is bound for Germany, Russian federation, Spain, Belgium, Slovenia, United States, Japan, Greece, Netherlands and France. In the backdrop of these issues, the present study is an attempt to evaluate the growth and instability in the export of coffee, its trade competitiveness in the world market and direction of trade and changing pattern of exports of coffee.