Bloomberg News

Indonesian Coffee Premium Gains 15% as Farmers Hold Back Beans

June 21, 2013

Buyers of coffee from Indonesia, the world’s third-biggest producer of the robusta variety, are paying a 15 percent higher premium for their beans as farmers hold back supplies due to lower prices, said Volcafe Ltd.

Indonesian beans for shipment in July and August are at a premium of $230 a metric ton to the price on NYSE Liffe in London, the Winterthur, Switzerland-based unit of trader ED&F Man Holdings Ltd. said in a report e-mailed today. That’s up from $200 a ton last week. Robusta coffee is heading for a fifth week of declines, the longest slump since Jan. 6, 2012.

“With current low prices, farmers are holding back again,” Volcafe said in the report. “Most of the exporters are facing a tough situation to cover. We expect more shipment delays and wash-outs might be inevitable,” it said, referring to exporters’ needs to buy and potential shipment cancellations.

Heavy rain in Indonesian coffee areas probably slowed the harvest, MDA Weather Services in Gaithersburg, Maryland, said in a report e-mailed yesterday. Rainfall amounted to 0.25 inch to 2.75 inches in Sumatra, where the country’s main growing region is located, and 3 inches to 6 inches in Java. The country is gathering its 2013-14 crop that started in April.

Farmers are storing coffee “in wet conditions, which has an effect on the quality as we see more and more mouldy beans,” Volcafe said. Exporters and domestic roasters are competing to buy beans at 17,000 rupiah ($1.7) a kilogram (2.2 pounds) to 18,000 rupiah a kilogram, the trader said. Inventory held by exporters is estimated to be below 30,000 tons, “which very low.”

Buyers of coffee from Vietnam, the biggest robusta grower, are paying a premium of $160 a ton to the exchange price, Volcafe data showed. That’s up from $135 a ton a week earlier. Robusta beans are used in instant coffee.

Demand

The “local market is trading smaller volumes on a daily basis,” Volcafe said. “On the other hand, demand keeps showing up for nearby positions.”

Stockpiles in Ho Chi Minh City were about 205,000 tons and farmers were still holding 310,000 tons of coffee, Volcafe said.

In India, supply is “very tight” as farmers hold on to their coffees, according to the report. Farmers there are estimated to be holding 20 percent of the robusta production.

Robusta coffee for September delivery gained 0.8 percent to $1,750 a ton by 4:31 p.m. in London.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus