AEKI urges cooperation with Vietnam

Fitri Wulandari, The Jakarta Post, Jakarta

he country's coffee exporters urged the government to talk with Vietnam, the world's largest robusta coffee exporter, in seeking ways to lift the current low price of the commodity.

The Association of Indonesian Coffee Exporters (AEKI) said a stronger price for robusta would help ensure the government's target of a 30 percent increase in the export value of coffee this year.

Rachmat Kartabrata, AEKI's executive secretary, said cooperation between Vietnam and Indonesia -- the two largest robusta beans producers -- was crucial to revive the falling price.

Vietnam had been blamed for creating an oversupply in the world market, which meant the price of the coffee beans had plunged.

"We want to convince Vietnam that flooding the market is damaging. If we can do this then we can control the market price," Rachmat told The Jakarta Post over the weekend.

Vietnam became the world's top robusta producer when its coffee production leapt from 413,600 tons in 1997-1998 to 900,000 tons in 2000-2001, taking over Indonesia's position. At present, Vietnam produces around 500,000 tons.

Indonesia produces some 350,000 tons of coffee per year, of which 85 percent is exported. Robusta beans account for 85 percent of Indonesia's coffee exports. The remaining 15 percent produced are Arabica beans.

Rachmat said there was a wide 120 percent price gap between the prices of robusta and arabica beans and that measures must be taken to correct the situation.

Robusta beans traded on London's LIFFE commodity future market for May stood at US$737 per ton. While Arabica beans traded on New York's CSCE commodity future market were around $1,770 per ton, Rachmat said.

"If the price gap can be narrowed down to 80 percent, the price for robusta beans could be increased up to $900 per ton," Rachmat said.

The Vietnam Coffee and Cocoa Association (VICOFA) and AEKI had signed a preliminary agreement last year to limit coffee exports and prop up the price. But no commitment was made on how to implement the scheme.

"This is why we need government support to follow this up" Rachmat said.

Vietnam and Indonesia supply the world market about 1.03 million tons of robusta beans a year, more than half the 1.9 million tons annually demanded.

Global coffee demand is primarily for the Arabica bean considered the high grade coffee bean. But the lesser quality Robusta is often blended with Arabica coffee.

The government wants the country's coffee export to increase by 30 percent from $510 million in 2003 to $663 million this year.

Rachmat said Indonesia's coffee supply was predicted to be stagnant this year as many farmers had abandoned their plantations due to the low price.

The World Bank on Saturday warned plunging world coffee prices would send between 20 to 25 million smalltime growers in developing countries into abject poverty.

The Bank projects coffee production to slide from 123.2 million bags in the 2002 to 2003 season to 106 million bags this year. But the slow recovery in prices threaten the sustainability of the commodity.

Coffee prices have just recovered from a 100-year low. Arabica beans are set to rise from $68 a bag to $72 next year. While robusta beans are projected to recover to $40 next year from the current $38.