Iran War Deals Significant Challenges To India's Coffee Exports – CoffeeTalk

India’s coffee industry is facing significant challenges due to the upheaval caused by the ongoing Iran war and the closure of the strategically vital Strait of Hormuz, which threatens its major export markets in the Middle East. As the world’s seventh-largest coffee producer, exporting approximately 70% of its output, India has seen a dramatic rise in shipments to countries such as the United Arab Emirates, Kuwait, Jordan, and Saudi Arabia over the past decade. Ramesh Rajah, president of the Coffee Exporters Association of India, warns that exporters might confront an 80% potential loss of the West Asian market in the upcoming months, citing delays and rerouting of shipments through the narrow strait, coupled with increased freight costs, which have surged nearly twofold since the war’s onset.

The Indian coffee sector produces between 350,000 and 370,000 metric tons annually, contributing about 3-4% of global output. Export revenues have notably increased from $1.14 billion in the fiscal year ending March 2023, reaching a new high of $2.13 billion by the end of the following fiscal year, giving India a prominent position in the global coffee market, confirmed by U.S. Department of Agriculture rankings.

Jacob Mammen, managing director of Badra Estates, notes that this challenging situation reflects a broader transformation within India’s coffee sector, which has evolved significantly since the liberalization reforms of the 1990s that dismantled state-controlled marketing, allowing growers to enter global markets. The country has rebuilt its presence in regions like Europe and Asia, placing an emphasis on specialty and value-added coffees. Robusta beans dominate production, constituting around 70%, while specialty varieties such as premium robusta and Monsooned Malabar have helped India secure a foothold in lucrative markets, including West Asia and Europe.

The impact of the U.S.-Israeli attacks on Iran, initiated on February 28, has jeopardized India’s export prospects, with 16.1% of India’s total coffee exports headed to West Asian markets in 2024, up from 12.6% a decade prior. Indian exporters, particularly smaller producers relying heavily on maritime routes through the Strait of Hormuz and the Red Sea, are experiencing significant disruptions, particularly during the peak Ramadan season, which has exacerbated existing trade flow issues.

Moreover, there are indications that global sourcing dynamics may shift due to these disruptions, as some European buyers are beginning to procure coffee from alternative suppliers like Uganda, illustrating the adaptability of trade flows in response to supply issues. Thomas Jacob of Poabs Estates emphasizes that the uncertainty surrounding shipments and rising costs has led to conservative purchasing decisions among buyers, posing significant risks for small and mid-sized farmers, who are particularly sensitive to fluctuations in export pricing linked directly to their viability in the market.

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