Indonesia sidesteps coffee price tumble

Coffee growers in one major producing country are avoiding, somewhat, the market slump which has provoked losses and unrest among farmers in the likes of Brazil and Colombia.

Coffee prices in Indonesia, which may this year lose third-rank among global coffee growing countries to a revived Colombia, are holding well above those of the international market, where futures in both arabica and robusta beans have set multi-year lows this month.

"Current domestic robust and arabica prices stand at $2 per kilogramme and $5 per kilogramme respectively," the US Department of Agriculture bureau in Jakarta said.

That is equivalent to $2,000 per tonne for robusta beans, which for January delivery were trading at $1,615 a tonne in London on Thursday.

For arabica, the price is equivalent to more than 220 cents a pound – twice the price of New York futures.

Taste for coffee

The price resilience reflects in part a disappointing harvest, seen falling 1.0m bags to 9.5m bags this year, hurt by dry weather during flowering and excessive rains during fruit formation, although the decline would have been worse were it not for a good result from the country's "fly" harvest picked early in the calendar year.

Indeed, the decline in overall production was 300,000 bags fewer than the USDA bureau had originally anticipated.

However, Indonesians are also increasingly drinking more of what they produce, with Starbucks boasting nearly 150 coffee bars in the country, and the Excelso chain more than 100 outlets.

"The annual domestic consumption continues to increase, largely due to Indonesia's growing middle class," the bureau said.

Exports drop

Indonesians are expected by the bureau to consume a record 2.5m bags of coffee in 2013-14, 30,000 bags more than the official USDA forecast, and nearly twice as much as demand at the turn of the century.

Indeed, with output falling year on year, Indonesia is one country expected to see lower exports in 2013-14, down 12% year on year to 7.8m bags.

And even that assumes inventories ending the season at just 48,000 bags, which would be the lowest in at least 50 years.