Far East traders react to RI's low coffee harvest

Far East traders react to RI's low coffee harvest

SINGAPORE (Reuter): Far East traders reacted yesterday with bemused skepticism to reports Indonesia's coffee output may fall by up to 40 percent in 1997, saying the talk was an attempt to further boost rallying prices.

"Forty percent down is a bit drastic. That's a bit too much. I don't think it's that bad. Indonesia's coffee exports should be the same as in previous years," a Singapore trader said.

Another dealer said the talk of damage to the Indonesian crop this close to the start of the harvest in April is "not surprising," coming at the same time as the sharp rally in coffee futures in New York and London.

Talk of a steep decline in the country's coffee output emerged this week when Indonesian dealers and producers said heavy rains and strong winds had hindered the second flowering of trees in coffee producing areas.

One Indonesian dealer said on Monday that adverse weather, which may also delay harvesting in areas of Sumatra island, could lead to a fall in the country's total coffee output by 40 percent over the previous season.

Other Indonesian market sources' estimates of the possible decline in production ranged between 15 percent and 40 percent, with the general consensus focusing on 20 percent.

"Let me tell you something. In the 20 years I've been in the coffee business, when the market goes up, the only news you see is bullish news. I wouldn't be surprised if the whole Indonesian crop has been destroyed by wind and rain," a dealer said.

Regional traders said their preliminary estimates of the Indonesian crop remained unchanged. They said robusta coffee exports should reach between 310,000-320,000 tons in 1997, almost unchanged from the previous year.

"There is no reason to think the crop is different from last year," one trader said.

Indonesia's standard Grade 4, 80 defects, coffee was quoted by the trade at around US$1,450-$1,500 a ton FOB Lampung port for nearby shipment, slightly easier than last week's quote of $1,450-$1,600 a ton on the same basis.

London's benchmark May contract hit a nine-month peak on Tuesday of $1,825 a ton before settling $51 up on the day at $1,768. The May CSCE contract in New York rose 3.85 U.S. cents to end at 203.15 cents a lb.

Export business around the region remained quiet, with activity in Vietnam currently slow, traders said.

"In the last two months, it's been frenetic. But we're in a bit of a lull right now," one trader said.

Traders said about 180,000 to 200,000 tons of Vietnam's coffee has been sold or committed. Vietnam's robusta exports will probably reach around 250,000-270,000 tons in the (November/January) 1996/97 harvest season.

One dealer raised the possibility that the number of defaults in Vietnam may rise in tandem with world coffee prices.

But another dealer discounted this, especially in the case of major trading houses buying Vietnam's coffee.

"There are probably some defaults with small buyers where the Vietnamese exporter does not care if he deals with him again.

There's also been some internal defaults. But they won't default on the major buyers," the trader said.

He added that this would harm Vietnam's reputation in the international market, something Hanoi doesn't want to happen.

Vietnam's benchmark Grade 2 coffee, 8.0 percent black and broken, was quoted by regional dealers at about $1,400-$1,500 a ton FOB Saigon port, up from $1,400 a ton last week.

Congestion in Saigon port has also eased with coffee shipments going out on a regular basis, dealers said.