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India's coffee exports are likely to rise as much as 10% in 2024 as a rally in global prices prompts European buyers to pay premiums in order to increase purchases from the country, industry officials told Reuters.

The South Asian country - famous as a tea producer - is also the world's eighth-largest coffee grower, mainly churning out the robusta beans used to make instant coffee. It also produces some of the more expensive arabica variety.

"The demand for Indian coffee, particularly robusta beans, is strong due to firm global prices resulting from production issues," said Ramesh Rajah, president of the Coffee Exporters' Association of India, predicting a rise in exports this year of up to 10%.

Robusta coffee is trading near its highest in at least 15 years as Vietnam, the world's biggest producer, is expected to produce less in 2023/24 than the previous season.

India exports three quarters of its production mainly to Italy, Germany and Belgium.

Indian coffee typically commands a premium over the global benchmark because it is grown under shade, hand-picked, and sun-dried. However, this year, premiums are higher than normal due to a production shortfall, exporters said.

Coffee exports in 2024 could jump to 298,000 metric tons from last year's 271,420 tons, said a Bengaluru-based dealer with a global trade house.

Indian robusta cherry is fetching a premium of nearly $300 a tonne over London futures because of strong demand, he said.

WEATHER WOES

While export demand is good, traders are waiting for supplies to increase, which could bring down local prices, the dealer said.

This season's robusta harvest is almost 20% complete, although rainfall in recent days in growing areas has been disruptive, said M M Chengappa, a coffee grower from Kodagu, in top producing Karnataka state.

The state-run Coffee Board has estimated that India's production could rise to 374,200 tons in the 2023/24 season, which started on Oct. 1, up from last year's 352,000 tons. However, farmers are saying that rainfall is limiting the upside in production.

"Torrential unseasonal rain in the last few days, along with the rains in December, has caused a lot of fruit droppings," said Chengappa.

Harvesting is also slowed by labour scarcity, despite offers of higher wages, said exporter Rajah.

"Global prices are rising, but Indian farmers' income is not rising in the same proportion due to higher production costs. They need to spend more on inputs and wages," Rajah said.