Indian coffee has been reaching cafes in cities like Dubai, Kuwait City and Riyadh for decades, but exporters now fear that up to 80 percent of their fastest-growing market could be lost. This crisis has arisen due to rising freight costs and maritime blockages.
Despite a temporary ceasefire between the US and Iran, trade routes are still entangled. The cost of shipping has become so high that it is putting pressure on the entire industry. Even after 21 hours of long talks in Pakistan on Sunday morning, no agreement was reached. US Vice President and chief negotiator JD Vance said that Iran refused to accept America’s conditions on its nuclear program. Therefore no deal was made.
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blockage in the strait of hormuz
This news is worrying for Indian coffee exporters. The blockage in the Strait of Hormuz may last for a long time. India is the seventh largest coffee producing country in the world. India exports about 70 percent of its total coffee.
India has grown well in West Asia (Middle East) in the last 10 years. Countries like UAE, Jordan and Saudi Arabia were expected to account for 16 per cent of India’s total coffee exports in 2024. “We may lose up to 80 percent of the West Asian market in the coming months,” said Ramesh Raja, president of the Coffee Exporters Association of India.
freight cost doubled
Most Indian coffee goes through the Strait of Hormuz. Shipments are arriving late, getting diverted or stuck at the transshipment point. Profits are decreasing due to increasing freight costs.
Freight costs have doubled since the conflict between the US, Israel and Iran began in February. European buyers have now started sourcing coffee from places like Uganda. There is a danger of losing the Indian market due to this.
Impact on the golden era in coffee exports
India’s coffee sector was growing a lot in the last few years. The export earnings in 2023 were $1.14 billion, which increased to a record $2.13 billion last year. India produces 3.5 to 3.7 lakh metric tonnes of coffee every year which is 3-4 percent of the total world production.
Jacob Mammen, managing director of Badra Estates, said that after liberalization in the 1990s, the Indian coffee industry reinvented itself. Made its place in Europe and Asia and increased focus on specialty coffee.
copious production of robusta
India produces both Arabica and Robusta coffee. Robusta accounts for 70 percent of production. Specialty coffees like premium robusta, monsoon malabar sell well in countries like Italy, Germany, Russia. Instant coffee is also sent to Japan.
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According to UN data, West Asia will account for 16.1 percent of India’s coffee exports in 2024, up from 12.6 percent 10 years ago. Currently, instability continues in this sector, which has increased the concern of Indian coffee exporters.
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