Vietnam's supply and India's demand of coffee

"Considering that, about 25,000 tonnes more is a noticeable improvement," Rau said. "The main factor which helped this recovery is international coffee prices."

India produces only 4.5 per cent of the world's coffee but exports 70 to 80 per cent of its output. Prices of robusta, which form the bulk of India's coffee exports, climbed 14 per cent to 54 US cents a lb in April-June over a year ago.

The board forecast India to produce 196,000 tonnes of robusta this year, up from 180,000 tonnes in the previous year, and 104,000 tonnes of arabica against 94,000 tonnes.

"The rains were also good. We had timely blossom showers in most of the coffee growing areas. The monsoon rains have also been fairly widespread," he said.

Major Indian producers include Tata Coffee Ltd. and Bombay Burmah Trading Corporation Ltd.

EXPORTS

The Coffee Board official said India's coffee exports were unlikely to see a big rise from last year's 201,555 tonnes because of rising domestic consumption growing at 5 per cent a year.

India exports most of its coffee to Italy, Russia and some other European countries. Rau said India was looking at markets in Spain, Japan and Australia.

Newer markets and better prices could boost investment, which has been lagging over the past few years.

India's coffee output had fallen in 2005/06 from a high of about 325,000 tonnes in 2001/02, on excessive rains and pest attacks in key growing areas of southern India.

"The present crop is in good shape than compared to the previous year. We are essentially getting back into good health," Rau said.

Although coffee plantings in non-growing regions such as in southern state of Andhra Pradesh, eastern state of Orissa and the mainly tea-growing northeastern states were low compared to the main plantation areas, the output is steadily increasing.

The area under plantation crops, including rubber and tea, in India is estimated at about 1.51 million hectares. About 1.32 million growers and 2.09 million workers are associated with the plantation industry.

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Coffee rose to a seven-month high in London after a decline in supply from Vietnam, the world's biggest producer of the bean, led consumers to buy stockpiles.

Vietnamese coffee growers have sold most of their last harvest, which ended February, and the next crop won't be ready for export until early November, according to commodity trader Sucden (UK) Ltd.

Inventory tracked by Euronext.liffe dropped 15% in the two weeks ending July 31 to the equivalent of 99,195 metric tonne, the exchange said last week. Stockpiles have plunged 50% in 2006.

"We're in a situation of constrained supply, where the market is particularly vulnerable to bad news," Christopher Wyke, who helps manage London-based Schroders Plc's $86 million commodity fund, said. "There is a lag in production."

Robusta coffee for November delivery on London's Euronext.liffe rose $18, or 1.4%, to $1,353 a metric tonne as of 12:34pm local time. The bean has gained 11% in the past year and is at its highest since January 30.

Euronext.liffe also said last week it was suspending from delivery 10,105 tonne of coffee at Trieste, Europe's No 2 coffee port, because of water damage at a warehouse operated by Henry Bath Italia Srl.

Growing consumption of coffee is spurring demand for the bean in emerging markets such as India, China and Brazil. Barista Coffee Co, an Indian coffee shop-chain owned by billionaire dealmaker C Sivasankaran, said on Monday it plans to sell a stake and spend Rs 50 crore to increase the number of its outlets by half this financial year.

"The Western coffee market is fairly saturated, so long-term demand increase will be coming from emerging markets, where coffee consumption is being popularised and demographics are boosting demand," Sudakshina Unnikrishnan, an analyst with Barclays Capital in London, said.

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