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USDA Report: India’s Coffee Sector Faces Climate Challenges and Historic Trade Opportunities

Posted on May 13, 2026 by Qahwa World

Author: Qahwa World – Dubai
Source: USDA Foreign Agricultural Service (FAS) – New Delhi Office
Report Number: IN2026-0026
Date: May 13, 2026

Executive Summary

India MY 2026/27 coffee production forecast at 6.14 million 60-kg bags
Arabica yields expected to decline 8% due to excessive rainfall followed by extended dry spell
Farmgate prices for Arabica down 16%, Robusta down 11% since October 2025
New free trade agreements with UK and EFTA countries offer zero tariffs on Indian coffee exports
Domestic consumption projected at 1.58 million bags, driven by soluble coffee demand
India aims to reach 900,000 metric tons production by 2047

1. Overview: India’s Position in Global Coffee Market

India ranks as the world’s seventh-largest coffee producer, after Brazil, Vietnam, Colombia, Indonesia, Ethiopia, and Uganda. Approximately 95 percent of India’s coffee production is exported, with green coffee accounting for about 59 percent of total exports and instant (soluble) coffee making up the remaining 41 percent.

According to the USDA Foreign Agricultural Service report from the New Delhi office, India’s coffee sector is at a critical juncture. The country faces climate-related production challenges while simultaneously gaining unprecedented access to European markets through newly ratified free trade agreements.

Key Insight: India’s coffee production comprises approximately one-third Arabica and two-thirds Robusta, with Robusta accounting for over 75% of total output due to its greater resilience to weather variability.

2. Production Forecast: MY 2026/27

FAS Mumbai forecasts India’s MY 2026/27 coffee production at approximately 368,400 metric tons, or about 6.14 million 60-kilogram bags, comprising 1.56 million 60-kg bags of Arabica (93,600 metric tons) and 4.58 million 60-kg bags of Robusta (274,800 metric tons).

📊 Figure 1: India Production Trend
Source: USDA/FAS (Chart data described below)

Figure 1: India coffee production has grown at a CAGR of 2.05% between MY 2021/22 and MY 2024/25

Production Data Table

Table 1: India Coffee Production Forecast (1000 60-kg bags)
Category	MY 2024/25 (Actual)	MY 2025/26 (Estimate)	MY 2026/27 (Forecast)
Arabica Production	1,762	1,730	1,560
Robusta Production	4,297	4,700	4,580
Total Production	6,059	6,430	6,140

3. Climate Challenges: The Threat to Arabica

The India Meteorological Department’s first long-range outlook for the 2026 southwest monsoon indicates below-normal rainfall at about 92 percent of the long-period average, with a 66 percent probability of below-normal to deficit conditions.

Arabica output is expected to decline due to below-normal monsoon rainfall combined with unusually high temperatures, which may adversely affect flowering and fruit set. In contrast, Robusta production is projected to remain relatively strong, reflecting its greater resilience to weather variability.

Rainfall Data for Coffee Growing Regions

Table 2: Rainfall Statistics for Karnataka and Kerala (January – April 2026)
State/District	Winter (Jan-Feb) Departure	Pre-Monsoon (Mar-Apr) Departure
Chikmagalur (Karnataka)	Large Excess (+244%)	Normal (-17%)
Kodagu (Karnataka)	Large Excess (+177%)	Normal (-7%)
Wayanad (Kerala)	Large Excess (+235%)	Deficit (-48%)
Travancore (Kerala)	Excess (+48%)	Deficit (-53%)

The data reveals a stark pattern: excessive winter rainfall (January-February) followed by deficit pre-monsoon rains (March-April). This extreme weather variability – from flooding to drought within weeks – is precisely the type of climate shock that most damages coffee flowering and fruit set, particularly for the more sensitive Arabica variety.

4. Yield Projections

For MY 2026/27, Arabica yields are projected to decline by eight percent year-on-year to 452 kilograms per hectare, while Robusta yields are expected to fall marginally by two percent to 1,239 kilograms per hectare, although still above the three-year average.

Table 3: Coffee Yield Comparison (kg per hectare)
Coffee Type	MY 2026/27 Forecast	3-Year Average (2022-2024)	Change
Arabica	452	475	-8%
Robusta	1,239	1,156	+7% (above average)

Why Robusta Outperforms: Robusta yields remain about 2.3 times higher than Arabica, reflecting its greater resilience and productivity. Arabica is more sensitive to altitude, pest, and climate variability, requiring more precise growing conditions.

5. Price Dynamics: Decline from Record Highs

Farmgate prices for Arabica and Robusta have declined by 16 percent and 11 percent respectively since October 2025. Despite this change, prices remain at a premium to other origins, though further moderation is expected. The decline in prices is being driven by expectations of higher output in key producing countries and elevated domestic stock levels.

📊 Figure 2: Farmgate Raw Coffee Prices in Karnataka
Exchange rate: Rupees 92.99 per US dollar (as of April 20, 2026)
Source: Coffee Board of India

Figure 2: Indian coffee prices have moderated but still trade at premium to competing origins

6. Export Outlook: Trade Agreements Transform Market Access

Post forecasts that MY 2026/27 coffee exports will rise by three percent to 6.22 million bags (373,140 metric tons), driven by higher exportable surplus and strong demand for soluble coffee exports.

New Free Trade Agreements

Table 4: New Trade Agreements Benefiting Indian Coffee Exports
Agreement	Partner Countries	Benefit for Coffee	Effective Date
India-UK CETA	United Kingdom	Zero duty on roast, ground, and instant coffee	Recently concluded
India-EFTA TEPA	Switzerland, Norway, Iceland	Zero percent duty on all coffee exports	October 1, 2025

The United Kingdom currently accounts for 1.7 percent of India’s coffee exports, while the EFTA countries (Switzerland, Norway, Iceland) offer new zero-tariff access. Europe has emerged as a more stable trading partner with increased inquiries. Italy remains the top destination, using almost 60 percent of imported Indian coffee domestically while 40 percent is processed for private label manufacturers for re-exports.

Export Destinations

📊 Figure 3: Coffee Export Share by Country (percentage)
Italy leads, followed by Germany, Russia, Belgium, and UAE
Source: Trade Data Monitor, LLC

Figure 3: Indian coffee exported to more than 125 countries, with 61% of shipments from Mangalore port

7. Export Challenges: Premium Prices and Freight Costs

Despite positive momentum, several challenges exist. Indian coffee prices are significantly higher than competing origins from Vietnam and Indonesia. High premiums could pose challenges to exports despite recent prices being lower than last year.

Freight costs to the Middle East have surged dramatically, from $700-$1,200 per 20-foot container in January/February to $1,500-$2,800, with occasional short-term spikes higher due to war risk surcharges, insurance costs, and vessel rerouting. Trade data indicates that about 11-12 percent of India’s total coffee exports in green bean equivalent go to the Middle East, the second-largest regional market after Europe (44-45 percent).

8. Domestic Consumption: A Growing Market

Post forecasts MY 2026/27 domestic consumption at 1.58 million 60-kilogram bags (94,800 metric tons), supported by rising demand for soluble coffee. Household consumption of soluble coffee is expected to account for a significantly larger share of domestic consumption, rising to around 73 percent next year.

India’s per capita coffee consumption remains at 0.04 kilograms, well below the global average of 1.3 kilograms, indicating significant growth potential.

Table 5: Domestic Consumption Breakdown (1000 60-kg bags)
Category	MY 2024/25	MY 2025/26	MY 2026/27 Forecast
Roast & Ground Domestic	330	415	420
Soluble Domestic	820	1,160	1,160
Total Domestic Consumption	1,150	1,575	1,580

9. Long-Term Vision: India 2047

The Coffee Board of India has set an ambitious long-term target of increasing national coffee production to 900,000 metric tons by 2047, through a combination of productivity gains, area expansion, and value-chain improvements. This includes replanting old and low-yielding bushes with high-yielding, climate-resilient varieties, promoting better agronomic practices (irrigation, pruning, soil health), and expanding cultivation into non-traditional regions.

📊 Figure 4: Monthly Coffee Exports by Volume (October-September)
5-year average vs 2024/25 vs 2025/26
Source: Trade Data Monitor, LLC

Figure 4: Exports in MY 2025/26 (October-January) were 26% higher than the previous year

10. Imports: Filling the Gap

Post forecasts MY 2026/27 imports at 1.39 million 60-kilogram bags (83,400 metric tons). Imports are expected to be four percent higher than last year as the use of Indian coffee in soluble coffee re-exports remains limited due to domestic beans trading at a premium, necessitating higher reliance on imported beans for processing and value addition.

Green beans account for approximately 94 percent of total imports and are primarily sourced from Indonesia, Kenya, Vietnam, Uganda, and Brazil for processing and re-export.

Table 6: India Import Tariff on Coffee Products
HS Code	Product Description	Standard Rate
0901.11	Coffee not roasted, not decaffeinated	100%
0901.12	Coffee not roasted, decaffeinated	100%
0901.21	Coffee roasted, not decaffeinated	100%
2101.11.20	Instant coffee not flavored	30%

11. Key Challenges Facing Indian Coffee Sector

Climate Variability: Excessive rainfall followed by extended dry spells during critical flowering stage
Fertilizer Costs: Persistent shortages and rising input costs across the value chain
Labor Availability: Coffee production is labor intensive, with nearly 70% of production cost attributable to labor
Premium Pricing: Indian coffee prices significantly higher than competing origins from Vietnam and Indonesia
Freight Disruptions: Surging shipping costs to Middle East due to geopolitical tensions

12. Opportunities

Free Trade Agreements: Zero tariff access to UK, Switzerland, Norway, and Iceland
Growing Domestic Market: India’s coffee market projected to grow at 8.9% CAGR by 2028
Soluble Coffee Demand: Double-digit growth in domestic soluble coffee consumption
Specialty Coffee: Estate branded coffees commanding prices comparable to export levels
Youth Demographic: Expanding urban coffee culture and younger consumers driving growth

Frequently Asked Questions

How much coffee will India produce in 2026/27?

According to the USDA FAS report, India is forecast to produce 6.14 million 60-kilogram bags (approximately 368,400 metric tons) in MY 2026/27, comprising 1.56 million bags of Arabica and 4.58 million bags of Robusta.

Why is Arabica production expected to decline?

Arabica yields are projected to decline 8% due to excessive rainfall in January and February 2026 followed by an extended dry spell during the critical flowering and fruiting stage. Arabica is more temperature-sensitive and has higher water requirements compared to Robusta.

What are the new trade agreements benefiting Indian coffee?

The India-UK Comprehensive Economic and Trade Agreement (CETA) offers duty-free access for roast, ground, and instant coffee to the United Kingdom. The India-EFTA Trade and Economic Partnership Agreement (TEPA), effective October 1, 2025, provides zero percent duty on all coffee exports to Switzerland, Norway, and Iceland.

How have coffee prices changed in India?

Farmgate prices for Arabica have declined by 16 percent and Robusta by 11 percent since October 2025. Despite this decline, Indian coffee prices remain at a premium to other origins, though further moderation is expected.

What is India’s long-term coffee production target?

The Coffee Board of India has set an ambitious target of increasing national coffee production to 900,000 metric tons by 2047 through productivity gains, area expansion, replanting with high-yielding varieties, and value-chain improvements.

Who are the main buyers of Indian coffee?

Italy remains the major buyer, followed by Germany, Russia, Belgium, and the United Arab Emirates. Indian coffee is now exported to more than 125 countries, with approximately 61 percent of shipments originating from the Mangalore port in Karnataka.

India’s Coffee Market Gains Momentum as Specialty Segment and Café Chains Expand

Posted on April 27, 2026 by Qahwa World

Dubai – Qahwa World

The Cimbali Group has shared new insights on its LinkedIn account highlighting the ongoing transformation of India’s coffee market, driven by the rise of specialty coffee and the rapid expansion of café chains.

Traditionally a tea-dominated country, India is witnessing a steady increase in coffee consumption, particularly among younger, urban consumers. Changing lifestyles, rising disposable incomes, and greater exposure to global coffee trends are contributing to this shift. According to industry estimates referenced in the report, the Indian coffee market is expected to grow at an annual rate of around 9–10 percent through 2030.

The report points to the growing influence of specialty coffee across major cities such as Bangalore, Mumbai, and Delhi, as well as emerging urban centers including Ahmedabad, Surat, and Jaipur. Independent cafés and local roasters are introducing single-origin coffees, alternative brewing methods, and a stronger focus on traceability, reflecting a shift in consumer preferences toward quality and transparency.

At the same time, organized coffee chains are accelerating the development of café culture across the country. Brands such as Starbucks, Blue Tokai, Third Wave Coffee, and Café Coffee Day continue to expand in both metropolitan and tier-two cities, contributing to the normalization of coffee as a daily habit and social experience. The coffee retail chain segment in India was valued at over $500 million in 2023 and is projected to grow steadily.

The LinkedIn post also includes industry perspectives from Arun, Chief Operating Officer at Fresh & Honest Café Ltd, who notes that the entry of new international players is expected to further reshape the market. He highlights emerging formats such as grab-and-go outlets, app-based ordering, and compact kiosks, alongside beverage innovation tailored to local tastes.

As the market evolves, the focus is increasingly shifting toward consistency and quality. The report emphasizes that scaling high-quality coffee requires not only premium beans but also reliable equipment, precise extraction, and well-trained professionals. Investment in barista training and operational standards is becoming essential for businesses aiming to maintain consistency across multiple locations.

The Cimbali Group concludes that the next phase of growth in India’s coffee industry will depend on the ability of operators to combine quality, technology, and skilled workforce development, as coffee continues to transition from a growing trend into a well-established culture.

India’s Quiet Coffee Superpower

Posted on February 28, 2026 by Qahwa World

By Dr. Steffen Schwarz

How a shade-grown origin once hidden behind state control and instant exports is being rediscovered through climate pressure, stronger roasting capacity, and a fast-maturing café culture.

India has long been one of the world’s major coffee producers — yet for decades, it remained largely invisible in the global specialty conversation. The country cultivated coffee at scale in some of the most biodiverse landscapes on earth, but much of its output was absorbed into anonymous blends and instant coffee supply chains. Its identity as an origin was diluted long before it reached the cup.

From State Control to Market Incentives

For much of the 20th century, India’s coffee sector operated under a centralised pooling system managed by the Coffee Board of India. Growers delivered their harvest into a regulated structure, and sales were conducted through auctions for domestic and export markets. The model aimed to stabilise trade and manage foreign exchange, but it limited differentiation. Exceptional lots were averaged into broader price pools, reducing incentives to pursue traceable quality.

Market liberalisation in the 1990s changed that equation. As pooling was phased out, growers gained more freedom to sell directly. Quality investments — selective harvesting, fermentation control, microlot separation, improved drying — became economically rational. India’s naturally complex growing environment finally had a pathway to market recognition.

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A Major Producer with Boutique Perception

India ranks among the world’s top coffee-producing nations, with annual production in the mid-300,000 metric tonne range. Official reporting places output at approximately 360,500 metric tonnes in 2023–24 and around 363,300 metric tonnes in 2024–25 (provisional), making India the world’s seventh-largest producer.

Most cultivation is concentrated in southern states — Karnataka, Kerala, and Tamil Nadu — with additional production in the Eastern Ghats. A defining feature of Indian coffee is shade cultivation. Grown under dense tree canopies in ecologically sensitive regions, shade moderates temperature, extends cherry maturation, and supports biodiversity. In an era of climate volatility, shade is both an environmental and agronomic advantage.

India produces both Arabica and Canephora (Robusta), with Canephora accounting for a substantial share. This balance aligns with domestic consumption habits, where milk-based beverages dominate and body-forward profiles perform well.

Climate Pressure and Processing Precision

Monsoon patterns increasingly shape the industry’s risk profile. Erratic rainfall, extreme weather events, and crop disruptions affect both volume and quality. Drying infrastructure, moisture control, and fermentation management have become strategic investments rather than technical details.

India’s globally distinctive monsooned coffees remain commercially relevant. When carefully controlled, the process creates low-acidity, heavy-bodied profiles suited to certain espresso blends. When poorly managed, quality deteriorates. Precision has become the dividing line.

Read also: Indian Coffee Export Earnings Set to Surpass $2 Billion in 2025

Domestic Consumption: Small but Expanding

India’s coffee consumption has risen steadily, from roughly 84,000 tonnes in 2012 to about 91,000 tonnes in 2023, with estimates near 96,000 tonnes in 2024. Per-capita consumption, however, remains low — approximately 0.07 kilograms per year compared to a global average near 1.3 kilograms.

The implication is significant: even small increases in daily coffee habits can generate substantial new demand in a country of over one billion people.

Soluble coffee remains dominant, representing around 70% of domestic consumption. While specialty cafés capture headlines, instant coffee continues to anchor volume growth through accessibility and convenience.

Café Expansion and Market Layers

India’s café landscape has evolved in stages.

Cafe Coffee Day normalised café culture for urban India in the late 1990s and 2000s, creating a mass-market “third place” environment. Starbucks entered through a joint venture with Tata Consumer Products and has expanded steadily, reporting 479 stores across 80 cities by March 2025. Costa Coffee operates through franchise partnerships, while McCafé and convenience retail formats add further layers of accessibility.

Good to read: Invisible Gravity in Coffee

Parallel to this expansion, a specialty movement has emerged. Roasters such as Blue Tokai Coffee Roasters and numerous independent operators now emphasise traceability, lighter roasting, and origin transparency. Northern entrepreneurs increasingly source directly from southern estates, reversing decades of value export by building domestic premium ecosystems.

Exports and Strategic Tension

Exports remain central to India’s coffee economy. Recent reporting places export earnings around USD 1.8 billion in FY24, with Europe as a key destination. As domestic consumption rises, competition between export markets and internal demand may intensify, especially for higher-quality lots.

Managing this balance will require stronger segmentation, transparent pricing, and climate-resilient production systems.

The Dual Identity

India today occupies a unique position: a large-scale, shade-grown producer with a rapidly professionalising domestic roasting scene and a café culture transitioning from novelty to habit. It is both a major export origin and an emerging consumer powerhouse.

The next phase of India’s coffee development will hinge on translating its ecological strengths and cultural diversity into measurable, traceable quality — while adapting to climate uncertainty and scaling domestic demand responsibly.

India is no longer a quiet bulk supplier. It is a complex coffee ecosystem redefining its global role — at scale.

Indian Coffee Producers Welcome GST Reduction to 5%

Posted on September 5, 2025December 6, 2025 by Qahwa World

New Delhi, September 5, 2025 (Qahwa World) – India’s coffee sector has warmly welcomed the government’s decision to cut the Goods and Services Tax (GST) on coffee from 12% and 18% down to 5%, describing it as a historic move that will boost domestic consumption and strengthen the country’s competitiveness in global markets.

The decision, adopted during the 56th GST Council meeting chaired by Finance Minister Nirmala Sitharaman, simplified the tax system into two primary slabs: 5% for essential and merit goods, and 18% as the standard rate, while keeping a 40% rate for de-merit goods such as tobacco and luxury items. Coffee was placed under the merit category, and starting September 22, roasted, instant, and processed coffee products will all benefit from the reduced tax rate.

Fresh Momentum for Domestic Consumption

For Neleema Rana George, Managing Director of Kelachandra Coffee, one of India’s oldest plantation companies dating back to 1786, the move marks a defining moment. She stressed that classifying coffee as an essential good would make it more widely available and affordable, thereby encouraging daily consumption, opening new avenues for growth, and creating greater balance between farmers, processors, and retailers. She emphasized that the positive impact of this decision “will extend from farm to cup.”

Specialty Coffee Poised for Growth

In the specialty sector, Devesh Khushalani, Co-Founder of Kranti Coffee, described the tax cut as “a ray of hope after a difficult period,” noting that lowering GST to 5% translates into fairer prices for consumers, allowing them to access Indian nano-lots and strengthening café culture.

He also pointed to pioneers such as Ashok Patre of Ratnagiri Estate and Hamsini of Sangameshwar Coffee Estate, who have positioned Indian coffee on the global stage through innovative processing methods and micro-lots that have scored above 90 points.

Export Competitiveness and Sustainability

From Rajasthan, Radhika Kabra, Founder of Qetli Coffee, underlined the global impact of the reform. She explained that cutting taxes on processing, packaging, and logistics by up to 6% gives Indian coffee a stronger edge against major producers like Vietnam and Brazil. According to the Coffee Board of India, export volumes are expected to grow by 15–20% in the coming year. Kabra said she plans to reinvest these savings in sustainable practices such as water-efficient drip irrigation, which will generate jobs and support local farmers.

She also noted that importers stand to benefit: “Lower GST makes Indian coffee more competitive, reducing prices by 4–5% and enabling access to GI-tagged varieties such as Coorg Arabica and Wayanad Robusta at better rates for international markets.”

A New Chapter for Indian Coffee

Across the sector, there is consensus that this tax reform is not merely a financial adjustment but a transformative milestone. It promises to drive domestic demand, fuel innovation, and reinforce India’s standing as a rising force in the global coffee trade.

As the September deadline for implementation approaches, optimism is running high. For many, the reform signals the beginning of a new chapter: one in which coffee becomes more accessible to millions of Indian consumers while also expanding its footprint on the world stage.