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)