Indonesia may not join coffee retention plan, says AICE chief

JAKARTA (JP): Indonesia may not join a global coffee retention plan due to financial difficulties and an estimated drop in coffee exports, chairman of the Association of Indonesian Coffee Exporters (AICE) Oesman Soedargo said on Wednesday.

Oesman said the association had difficulties obtaining the Rp 4.9 billion (US$569,767) needed in setting up storage facilities and to allocate reserve funds to support the retention plan.

He said that, although Indonesia would not join the retention plan, the country's exports would decline due to an estimated drop in production.

The lower production would result in a decline in exports to 300,000 metric tons from the initial target of 350,000 tons, he said, adding that with this lower production scenario, Indonesia would no longer need to cut its exports by 20 percent as required under the retention plan.

"Coffee export should be 350,000 tons, but now we'll barely reach 300,000 tons," Oesman told reporters on the sidelines of a hearing with the House of Representative's Commission V, which oversees trade and industrial affairs.

Fourteen members of the Association of Coffee Producing Countries (ACPC), including Indonesia, agreed May 19 on a plan to cut coffee exports by 20 percent to help stimulate world coffee prices.

AICE members, which make up some 85 percent of world supply, should have outlined a detailed retention plan by June 16, but Indonesia failed to respond, pending confirmation from the country's regional producers.

"We must ask the regional producers whether they could afford to join the plan," he said, adding bad weather might reduce this year's coffee production to around 420,000 tons from an average of 500,000 tons.

Oesman estimated that by July Indonesia could respond to ACPC's coffee retention plan.

He further said that unlike in other countries, Indonesian coffee exporters must cover the retention cost by themselves.

He said the Indonesian government had rejected the association's request to cover this year's retention costs because of a lack of funds.

According to him, Brazil, which produces some 24 million 60- kilogram bags, prepared funds of 300 million reals (US$165.7 million) for the retention plan.

Oesman acknowledged that retaining coffee exports was the best way to stimulate international coffee prices.

He said an oversupply had caused a sharp drop in the price of robusta coffee to 90 U.S. cents per kilogram from an average of $1.2 per kilogram last year. (bkm)