Asian coffee trade wary of RI rains
Asian coffee trade wary of RI rains
SINGAPORE (Reuters): Late rains drenching the Indonesian
coffee belt will likely trim the losses inflicted by a drought
caused by the El Nino weather pattern, regional dealers said
yesterday.
Steady rain continued to fall over the key coffee-growing
regions of Bengkulu, Lampung and South Sumatra over the past 24
hours. The three areas account for up to 70 percent of coffee
production in Indonesia.
"It looks like the (annual) monsoon season has arrived. All
the areas are getting good rains. This is good as long as it
lasts," a coffee dealer for a Singapore commodity house said.
"It's still raining. The monsoon seems to be on the way," a
European trader added.
But the coffee trade said it was too early to say how much the
rains, which broke a long drought triggered by El Nino, will
boost Indonesian coffee production in the 1998 season.
"It will definitely trim the losses, but as to how far it will
do so is difficult to tell. The lowland farms are starting to get
some rains and that will help the crop," a dealer said.
"It may help a little bit, but the damage inflicted by the
drought is already there," another coffee trader said.
He said the lowland farms which have borne the brunt of the
blistering dry spell "still need a lot of rain so the moisture
can reach the roots of the coffee trees. Much of the soil still
remains pretty dry."
Regional dealers have previously estimated Indonesia's
drought-stricken coffee crop will only reach 300,000-320,000
tons next year, down sharply from a normal output of 450,000
tons.
"We'll get a better idea of the situation, maybe by next
month. We need several more weeks of rain," one dealer said.
Indonesia is the world's third biggest coffee producer behind
Brazil and Colombia.
Its harvest consists mostly of robusta beans, a more bitter
brew than the milder tasting arabica grown in Central and South
America. Robustas are extensively used in the instant coffee
industry.
More immediately, coffee business in the region remained
steady with some trade houses engaged in covering their shorts.
"One European house still appears to be very short. They
bought 2,000 tons over the past two-three days. The flow should
really come out of Vietnam by the end of this month," a dealer
said.
The European trading house purchased the coffee from Vietnam
at around US$275 under basis the January robusta contract in
London, dealers said.
"The deal was probably struck at that level," one said.
Traders said the robusta market in London will probably open
higher later on Wednesday following the strong close of the New
York arabica market.
"I expect it to open $20-$25 higher because New York closed
very strongly," a dealer said, adding the key January robusta
contract should hit $1,640-$1,645 a ton after closing on Tuesday
$20 down on the day at $1,625.
"New York closed pretty strong so I reckon it should be $30
higher," another dealer said.