India's coffee exports hit as US war on Iran disrupts global supply chains | Here's how

FOr decades, amerindic coffee tree has made its way of life into cafes crossways Dubai, capital of kuwait City and Riyadh. The industry now fears that up to 80% of its most promising growth market could evaporate behind a wall of rising freight costs and naval blockades, reports Nikkei Asia.Even with a temporary ceasefire between the US and Iran, trade routes are tangled. The cost of shipping has climbed so high that it’s put a squeeze on the industry.The hope for a cooling period also evaporated on Sunday morning after a 21-hour marathon of Pakistan-mediated talks in Islamabad.Despite the long hours, US vice president and chief negotiator JD Vance said there was no deal, and the delegation will be returning "without a deal.”As per Vance, the negotiations collapsed after Tehran refused American terms regarding its nuclear programme. The failure meant “bad news” for Iran, the US vice president said.Strait of Hormuz pressure buildsFor Indian coffee exporters, it was a sign that Strait of Hormuz disruptions could be a long-term crisis. India is the world’s seventh-largest coffee producer, behind Brazil, Vietnam and four others, according to the US Department of Agriculture.India exports roughly 70% of its coffee output. Over the past decade, it has expanded steadily into West Asia, with markets such as the UAE, Jordan and Saudi Arabia accounting for more than 16% of total exports in 2024.“Exporters could face as much as an 80% loss of the West Asia market in the coming months,” Ramesh Rajah, president of the Coffee Exporters Association of India, told Nikkei Asia. He added that this is because more Indian coffee is being shipped through the Strait of Hormuz. “Shipments are being delayed, rerouted or stuck at trans-shipment points, while rising freight costs are squeezing margins,” he said.Costs double, routes disruptedFreight costs have reportedly doubled since the onset of the US-Israeli war on Iran in February.Shipments are being rerouted or stranded at trans-shipment points. Buyers in Europe are already looking toward Uganda as a more reliable alternative. This threatens India’s hard-won market share.Strong export growth now under strainIndia’s coffee sector had been celebrating a golden era. Export earnings nearly doubled from $1.14 billion in 2023 to a record $2.13 billion this past year, as per reports. Annual production stands at about 350,000-370,000 metric tons, accounting for roughly 3%-4% of global output, 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 liberalisation in the 1990s, which ended state-controlled marketing and pushed growers 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.India’s coffee marketIndia produces both arabica and robusta beans, with robusta making up around 70% of output, according to the Coffee Board. Specialty varieties like premium robusta and Monsooned Malabar have helped it build a niche in higher-value markets such as Italy, Germany and Russia, while also supplying instant coffee to Japan.That said, US-Israeli attacks on Iran have disrupted trade flows. United Nations data shows West Asia accounted for 16.1% of India’s coffee exports in 2024, up from 12.6% a decade earlier.