Indonesia's coffee exports may retreat 14% in 2013/14

Coffee exports from Indonesia, the third largest producer of Robusta should retreat to the lowest level in two years, with the increase in domestic demand and lower volume harvested in the country. Shipments may fall by 14% to 385,000 tons, or 6.42 million bags of 60 pounds, compared to the previous cycle, according to the average estimate of seven exporters and roasters.
If confirmed, the volume will be the lowest since 2011, according to the Central Statistics Agency. The production, in turn, may register a decline of 10%, totalling 595,000 tons, or 9.92 million bags, the survey data point.
The reduction of the Indonesian shipments may result in cooling of the declining prices of the variety used in instant drinks Nestlé SA and Kraft Foods Group Inc. commodity futures have dropped 17% compared to the highest level in five months recorded in March this year, with ample supply of grain from Vietnam and Brazil. The crop is expected to grow 13% Vietnamese and production will exceed demand for the second consecutive year cycle in 2013/14, points Volcafe, a unit of Swiss-based commodities broker ED & F Man Holdings Ltd.
"The production will fall because of the climate and the biennial culture, as we had a production high last year," said Sumita, the Association of Exporters and Coffee Industry in Indonesia. "The local consumption is growing and all are competing for grain," he said Sumita, who uses only one name.
In the higher regions of Sumatra, Indonesia in the south, production could decline more than 50% to an average of 1.5 tons per hectare, due to heavy rains that have focused on the country, according Sunyoto, who coordinates a group of 37 producers. The main harvest will begin in mid-June with a month delay, Sunyoto points. "A full crop last year weakened the coffee trees," he added.
"A great production is not always a good thing for us," said Sunyoto. "Some producers stopped growing for a year, while the coffee trees need a longer time to grow up and go into production again," he added.
The Indonesian production may fall 10% to 10.5 million 60-kilogram bags in the season 2013/14, according to Volcafe. For the Department of Agriculture (USDA), the country's crop will decline 5.5% to 9.165 million bags in 2013/14.
The Organization data show that the increase in shipments may mean that production has been underestimated, according to Andrea Thompson, chief research and analysis CoffeeNetwork, Irish unity of INTL FCStone Inc. Exports in April totalled 600,000 bags, compared to 561 448 additional bags shipped in the same month last year, says the ICO (International Coffee Organization).
"We still have some bullish reports from Indonesia," said Thompson. "If you look at the reports export ICO, the flow is strong in Indonesia. Signals show that the production was underestimated," he added.
The demand for local roasters for coffee produced in Indonesia is growing. The consumer may total 2.58 million bags in 2013/14, an increase of 53% compared three years ago, according to the Department of Agriculture (USDA).
The industry is offering more than exporters in the purchase of grain, says Sumita. The local roasters are ready to purchase Robusta coffee for 21,000 rupees per kilogram, or U.S. $ 2,109 per tonne, while exporters are offering about 19,000 rupees, said Sunyoto.
The rains have delayed deliveries to the warehouses of Lampung, raising the premium on international prices. Buyers are offering $ 135 per ton above the price in London International Financial Futures and London (NYSE Liffe) for shipments in June / July, compared to the premium of $ 50 in April, during the beginning of the crop year, said Moelyono Soesilo, purchasing manager and marketing of PT Taman Delta Indonesia. The daily deliveries in the third week of May reached 800 tons, compared with more than 1,000 tons in the same period last year.
"Exports will depend on prices," says Sumita. "We do not confine shipments when prices are good, but we can see that the supply pressure is too great, especially Vietnam and Brazil," he added. About $ 2,200 per ton is the "ideal price" for exporters and producers, according Sumita, a level 18% higher than current prices.