Broker absence hits Asian coffee trade

Broker absence hits Asian coffee trade

SINGAPORE (Reuters): The absence of a strong middleman in the Indonesian coffee market is hampering trade flow and restricting exports, traders said yesterday.

The coffee merchants, mostly ethnic Chinese, are no longer venturing into the hill country to source for coffee due to renewed tension in Indonesia where the Chinese are singled out for attack, they said.

"Most of the middleman are Chinese, by chopping the middleman you are slowing exports," one trader at a local house said.

"They don't dare to travel far up to the hills. This is clogging the distribution line."

Traders said an increase in security at the main trading center of Bandar Lampung in Sumatra after a spate of looting, is also slowing the arrival of beans.

"They have to travel in armed convoys and this is slowing the movement," one trader said.

Beans are still offered from Indonesia in small lots of about 50-100 tons but offers are not being made for full cargo sizes of 500-1,000 tons, traders said.

The continued shortage of containers, they said, is another factor that is contributing to the reduced exports.

They said about a quarter of Indonesia's annual production, estimated at 330,000 tons, have been exported so far, but some are skeptical if the full export potential could be achieved due to the country's economic troubles.

"It's so chaotic out there right now. I think some of the exports would be affected by all the things that are going on down there," another trader said.

Indonesian traders said hundreds of people had gotten away with 15-20 tons of coffee beans per day during one weekend of looting in early July, plucking even unripe beans.

Despite the supply hiccups, prices have not risen due to weak demand and casual buying interest as buyers are comfortable amid news of a healthy harvest from Brazil.

"There doesn't seem to be much demand at the moment. Buyers are waiting for Brazil, which seems on track to give a huge harvest," a trader said.

In London on Tuesday, benchmark September ended at $1,554, compared with $1,544 a week ago.

Indonesian supplies were offered at around $130/$160 per ton under London levels, steady from a week ago. Vietnam benchmark grade 2, five percent black and broken beans were seen by the trade at $90/$130 under, also unchanged.

Traders said Vietnam is still offering limited volumes, even though its at the tail end of sales until beans from the next harvest arrive in October.