Coffee traders eye Indonesian crop

Coffee traders eye Indonesian crop

LONDON (Reuters): Coffee traders are concerned about the flow of Indonesian coffee into the market given the country's economic turmoil and social unrest, ABN AMRO Chicago Corporation said.

The diversified Dutch investment bank said with Vietnam happy to hold back its crop, attention had turned to the Indonesian new crop.

"With the economic turmoil and not insignificant social unrest, traders are concerned about the flow of coffee from this area," it said in its May coffee report on Wednesday.

"While accepting that coffee usually finds its way to the market, especially at the right price, supply disruption is a major concern in this tight robusta market," it added.

Coffee shipments from Indonesia, a leading robusta coffee exporter, have been delayed to June from May because of a late harvest due to severe drought last year.

Riots sparked by fuel price hikes rocked the North Sumatra capital of Medan on Tuesday and thousands of students and workers took to the streets in other cities in protest against economic conditions that have plunged Indonesia into its worst financial crisis in decades.

The price increases were part of a package of reforms agreed with the International Monetary Fund.

Robusta coffee futures on the London market rallied strongly on lack of selling from Vietnam, another key exporter, and poor harvests in some major African producing states.

Benchmark July futures hit a 10-month high of $1,959 per ton in mid-April. The contract hovered at around $1,820 on Tuesday after rebounding from the late April trough of $1,675 on aggressive fund selling.

In its report, ABN AMRO said only around 70 percent of Vietnam's 1997/98 crop of between 5.8 and 6.0 million bags had been sold.

"With the farmers still well financed, coffee which is normally well sold at this time of the season could well be slipped into the market right up until the next harvest comes on line," the bank said.

"Current estimates put the crop at around 70 percent sold," it said.

ABN said the outlook for arabicas, the premium beans, was less bright. It said New York-traded arabica futures could set new lows in May. On Monday, July futures hit 1998's low of 124.80 cents a lb.

The bank said further downward pressure was expected from Brazil, which is bracing for a bumper crop, and Central American origins.