Heavy rains in Kerala and parts of Karnataka has started showing an adverse effect on tyre and coffee industry stocks. With rubber output already seen taking a hit since 1 August, the coffee production is set to slump to its 21-year low. According to the United Planters' Association of Southern India, from 1 October, the coffee output will be 25 percent lower than the estimated 316,000 metric tons and this would be the lowest since 1997-98 (as per government data).
India is the seventh largest producer of coffee in the world as of 2015-16 and exports 70 percent of this production. While this will hurt Indian producers, the global market sellers will benefit price-wise from the fall in supply. Flood-hit Kodagu district accounts for the 40 percent of India's production, and along with the neighbouring districts of Chickmaglur and Hassan, Karnataka makes up for 70 percent. Kerala follows Karnataka, making for 20 percent of the country's output.
On the other hand, flood-hit Kerala accounts for 85 percent of India's rubber production, the key input in the tyre industries. Companies dependant on the state's production like MRF, JK Tyres, Apollo Tyres and Ceat are likely to see a drop in margins.
Apollo tyres share price has already been seen falling as much as 11 percent this month. The Gurugram-based company has plants located in Perambra and Kalamassery, Kerala, which have been damaged due to floods. MRF stocks slumped by 6 percent in August.
India is the sixth largest producer of rubber and the second last consumer of the same. Industry experts said that as the damage from floods would take a few years to recover, Indian tyre makers are likely to depend on imports for production.