Bloomberg News

Coffee Crop in Indonesia Poised for Highest in 3 Years

March 05, 2012

The coffee harvest in Indonesia, the third-biggest grower of the robusta variety used in instant drinks and espressos, is set to climb to the largest in three years, potentially capping an 11 percent rally.

Production may increase 20 percent to 10 million bags this year from 8.3 million bags a year earlier, according to the median estimate in a Bloomberg survey of seven exporters, two traders and a roaster. That’s the most since 2009, according to U.S. government figures, and more than the 9.1 million bags predicted by Volcafe, a unit of ED&F Man Holdings Ltd.

Robusta futures jumped to a five-month high in February as Vietnamese growers, the world’s biggest, held back supplies. The harvest from Indonesia starting in April may help replenish inventories, limiting gains and containing costs for Nestle SA (NESN), maker of Nescafe and Nespresso. Prices may drop as low as $1,700 a metric ton from $2,015 now, according to INTL FCStone Inc.

“The tightness in the robusta market will be here for at least another month,” said Oscar L. Schaps, managing director of global soft commodities at INTL FCStone in Miami. “The recent rise will attract more exports from Vietnam.”

Global coffee exports fell 9.9 percent to 7.99 million bags in January from a year earlier, the International Coffee Organization said Feb. 29. Shipments from Vietnam fell 19 percent to 292,000 tons in the first two months, according to the General Statistics Office in Hanoi. Farmers withheld beans after prices plunged 14 percent last year, forcing roasters to tap European stockpiles.

‘Lone Supplier’

“Vietnam is almost the lone supplier of volume robusta these last couple of months, until India, Uganda, Indonesia, Ivory Coast or even Brazil start to ship more volume come April and May,” Volcafe said in a report.

Global robusta output will exceed demand by 2.5 million bags this season, compared with a 700,000-bag shortage last year, Macquarie Group Ltd. said Dec. 13. Expanding robusta harvests contrast with an anticipated shortage in the arabica variety favored by Starbucks Corp. (SBUX), after the heaviest rains in two decades damaged Central American plantations.

The May-delivery robusta contract dropped as much as 0.5 percent to $2,010 a ton before trading at $2,015 a ton on the NYSE Liffe Exchange at 7:51 p.m. Singapore time. Prices for the most active contract have gained 11 percent this year.

Exports may climb 14 percent to about 400,000 tons, said Suyanto Hussein, chairman of the Association of Indonesian Coffee Exporters and Industries. Local consumption may increase to 250,000 tons from 200,000 tons, he said. Output declined last year as a longer-than-usual rainy season damaged crops.

‘Enough Sunlight’

“The weather is relatively good for the coffee harvest this year,” Isdarmawan Asrikan, director at Surabaya, East Java-based exporter PT Lintas Utama said by phone on Feb. 27. The monsoon season was not as wet as a year earlier and “this is good for the drying process as we should get enough sunlight, resulting in good quality beans.”

Robusta, which is mostly grown in Lampung, Bengkulu and South Sumatra provinces, represents about 75 percent of Indonesia’s production. The harvest runs from April to July, with a smaller crop through September. Each bag weighs 60 kilograms (132 pounds).

Exports from southern Sumatra fell to 5,358 tons in February from 6,306 tons a month earlier, according to data released by Lampung’s trade office today.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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