Coffee retention scheme burdens local exporters
Coffee retention scheme burdens local exporters
JAKARTA (JP): Indonesian coffee exporters want a review of the coffee retention scheme of the Association of Coffee Producing Countries (ACPC), saying it has increasingly become a burden to them.
Mustafa Sulaiman, deputy chairman of the Association of Indonesian Coffee Exporters (AICE) for foreign affairs, said yesterday that the retention scheme has been expensive for exporters as a result of stock depreciation, storage costs and inspection fees.
Furthermore, banks are unwilling to accept retained stock as collateral, he added.
"AICE members have lately been asking both AICE's central board in Jakarta and the government to review the retention scheme. Local exporters are crying out every day because retaining exportable coffee has become very burdensome," he said.
Earlier this year, the government, under a 1993 ACPC agreement, ordered the retention of up to 20 percent of Indonesia's exportable coffee in order to prop up prices on the world market and reduce stocks in consumer countries.
Indonesia is a major producer of Robusta coffee.
Under the ACPC agreement, 20 percent of exportable Robusta coffee must be stockpiled if prices on the world market fall below US$1.35 per pound.
If prices range between $1.35 and $1.50 per pound, producers are required to retain only 10 percent of their exportable coffee, and if prices range between $1.50 and $1.60 per pound, no retention is required. Exporters may release their retained stock if prices exceed $1.60 per pound.
Prices are currently $2.20 per kilogram, or less than $1 per pound, at the farmers' level, Mustafa said.
He said growing coffee exports from non-ACPC countries, such as Vietnam, was one of the reasons for the dropping prices.
Mustafa said Indonesia's retained stock has so far reached 16,000 tons.
"If prices are estimated at a low $2.20 per kg, this means we have used up to Rp 80 billion to retain the stock," he said.
Mustafa said AICE has proposed to the government several alternatives to the retention plan but has not yet received an answer. He declined to elaborate.
"We only hope that the government, ACPC or any other party concerned can figure out some other way of keeping coffee prices up without having to retain stock," he said.
"Prices now are quite favorable, but it's not what we are concerned about. The stock retention is our major problem right now," he added.
Mustafa said that further retention of stocks may cause exporting companies in Indonesia to go bankrupt, or force them to buy from farmers at lower prices.
He said that over the past two years, the number of coffee exporters has dropped from 1,000 to only 70, but said that the bankruptcies have not been due to the retention scheme alone, but was also to other problems, including mismanagement.
Mustafa said the proposed review of the retention scheme may be one of the topics discussed in AICE's up-coming International Coffee Symposium in Bali.
The symposium, which will take place from Nov. 26 to Nov. 29, is the second to be held by AICE. It will be attended by representatives of ACPC member countries, which include major world producers Brazil, Colombia and Ivory Coast, as well as local participants and representatives of the International Coffee Organization.
AICE estimates that Indonesia's coffee exports for the 1995/1996 coffee year (October-September) is 275,000 tons, slightly higher than the 1994/1995 exports of 210,000 tons.
Exports in 1993/1994 reached 305,000 tons and in 1992/1993 400,000 tons.
Indonesia is the world's third-largest coffee producer, with 350,000 to 400,000 tons, or up to 9 percent of the world's total production. Brazil produces 27 percent and Colombia about 18 percent.
Robusta coffee makes up less than 20 percent of the world's total coffee production. (pwn)