Over the decades, Indian coffee has made its way into cafés across Dubai, Kuwait City and Riyadh. The industry now fears up to 80% of its promising growth market could evaporate behind a wall of rising shipping costs and a naval blockade, the Nikkei Asia reported.
Even with the temporary ceasefire between the United States and Iran, trade routes are intertwined. The cost of shipping has skyrocketed, putting pressure on the industry.
Hope also evaporated in a cooldown on Sunday morning after a 21-hour marathon Pakistani-brokered talks in Islamabad.
Despite the long hours, US Vice President and chief negotiator J.D. Vance said there was no agreement, and that the delegation would return “without an agreement.”
According to Vance, the negotiations collapsed after Tehran rejected American conditions regarding its nuclear program. The US Vice President said that failure means “bad news” for Iran.
Strait of Hormuz pressure is increasing
For Indian coffee exporters, this was a sign of that The turmoil in the Strait of Hormuz could be a long-term crisis. India is the world’s seventh-largest coffee producer, after Brazil, Vietnam and four other countries, according to the US Department of Agriculture.
India exports approximately 70% of its coffee production. Over the past decade, it has steadily expanded into West Asia, with markets such as the UAE, Jordan and Saudi Arabia accounting for more than 16% of total exports in 2024.
“Exporters may face a loss of up to 80% in the West Asian market in the coming months,” Ramesh Raja, president of the Coffee Exporters Association of India, told the Nikkei Asia. He added that this is due to more Indian coffee being shipped through the Strait of Hormuz. “Shipments are being delayed, rerouted or held up at transshipment points, while rising freight costs are putting pressure on profit margins,” he said.
Costs doubled, and roads were blocked
Shipping costs have reportedly doubled since the beginning of the crisis The US-Israeli war on Iran in February.
Shipments are redirected or stranded at transshipment points. Buyers in Europe are already looking to Uganda as a more reliable alternative. This threatens India’s hard-earned market share.
Strong export growth is now under pressure
India’s coffee sector was celebrating a golden age. Export revenues nearly doubled from $1.14 billion in 2023 to a record $2.13 billion last year, according to reports. Annual production is about 350,000 to 370,000 metric tons, which represents about 3% to 4% of global production, according to the Coffee Board of India.
Jacob Mammen, managing director of Badra Estates, said the current shock comes at a time when India’s coffee sector has been reshaping itself since liberalization in the 1990s, which ended state-controlled marketing and pushed farmers into global markets.
“Since then, India has rebuilt its presence in Europe and Asia and increasingly focused on specialty and value-added coffee,” Mammen told Nikkei Asia.
Coffee market in India
India produces both Arabica and Robusta beans, with Robusta making up about 70% of production, according to the Coffee Council. Specialty varieties such as premium Robusta and Malabar monsoons have helped it build a niche in higher value markets such as Italy, Germany and Russia, while also supplying instant coffee to Japan.
However, US-Israeli attacks on Iran have disrupted trade flows. West Asia accounted for 16.1% of India’s coffee exports in 2024, up from 12.6% a decade ago, UN data shows.
