Indian coffee exports face disruption as Iran conflict threatens Hormuz shipping routes

India’s coffee industry is facing heavy pressure from the Iran conflict after disruptions to shipping through the Hormuz Strait have made exports to major Western Asian markets more difficult. The situation poses a major risk for India, the world’s seventh-largest coffee producer, because around 70% of its coffee production is destined for export.

Hormuz disruption hits export routes and margins

Ramesh Rajah, chairman of the Indian Coffee Exporters Association, said Indian exporters could lose as much as 80% of the Western Asia market in the coming months. He attributed the problem to the growing share of India’s coffee exports that must pass through the Hormuz Strait.

Rajah said many shipments are arriving late, needing rerouting, or being stuck at transfer points. He added that freight costs have risen, eroding exporters’ profits. While some initially expected the disruption to last only a few weeks, it has continued longer than expected, creating volatility across the supply chain.

Production and export revenue remain strong, but risks are rising

According to the Indian Coffee Board under the Ministry of Commerce and Industry, India produces about 350,000–370,000 tonnes of coffee annually, representing about 3–4% of global output. Export revenue has nearly doubled, rising from about USD 1.14 billion in the fiscal year ending March 2023 to a record USD 2.13 billion in the fiscal year ending last month.

USDA data place India as the world’s seventh-largest coffee producer, after Brazil, Vietnam, and four other countries.

Industry transformation and product mix

Jacob Mammen, CEO of Badra Estates, said the current crisis will test the sector’s transformation beyond immediate disruptions. He noted that the industry began to transform more meaningfully after the liberalization wave of the 1990s, when India ended state-controlled distribution and consumption and allowed growers to participate more deeply in the global market.

Mammen said India has gradually broadened its presence in Europe and Asia while shifting focus to specialty coffee and higher value-added products. The Indian Coffee Board says India produces both arabica and robusta, with robusta accounting for about 70% of total output.

Premium robusta grades and specialty coffees such as Monsooned Malabar have helped India build a foothold in higher-value exports to markets in West Asia and Europe, including Italy, Germany, and Russia. India also supplies soluble coffee for the Japanese market.

Western Asia share of exports increases

The outlook for India’s coffee export sector has deteriorated since the United States and Israel began attacks on Iran on February 28. UN trade data show Western Asian markets accounted for 16.1% of India’s total coffee exports in 2024, up from 12.6% a decade earlier.

Indian exporters—especially small and medium-sized enterprises—depend heavily on shipping routes through the Hormuz Strait and the Red Sea. During the Ramadan peak, when import demand rose in many Middle Eastern countries, late deliveries disrupted trade significantly.

Logistics bottlenecks and early signs of shifting buyers

Leaders of several large Indian exporters told Nikkei Asia they are facing heavy pressure from late deliveries, rising transport costs, and logistics bottlenecks on routes linked to the Middle East, even as they continue to buy coffee from farmers.

Markets are showing early signs of changes in global coffee flows. Some European buyers have started increasing imports from alternative sources such as Uganda, suggesting supply disruptions may be shifting trade patterns away from Indian coffee.

Thomas Jacob, CEO of Poabs Estates in Kerala, said shipping uncertainty and higher costs are making exporters more cautious, which affects prices and purchasing timelines. He added that small and mid-sized farmers, who rely heavily on export markets, are the most vulnerable group because when export prices face pressure, losses often fall on coffee growers.