Indonesia starts coffee retention this month

JAKARTA (JP): Indonesia has decided to join a coffee retention program initiated by the Association of Coffee Producing Countries (ACPC) and will start the program this month.

Director General for Foreign Trade at the Ministry of Industry and Trade Djoko Muljono said here on Tuesday that Indonesia would retain 20 percent, or about 8,000 metric tons, of its exportable coffee worth some Rp 40 billion (US$4.5 million) starting this month until January next year.

"We made the decision during a recent ACPC meeting in London," Djoko said.

ACPC decided in May this year to retain 20 percent of its coffee exports in a bid to curb the drop in the price of coffee on the domestic market. Thus far, however, only two out of the 14 members of the organization have actually begun to realize the plan.

The world's largest producers, Brazil and Colombia, have retained 750,000 tons and 350,000 tons respectively.

In Asia, robusta giant Vietnam remains undecided over the plan, as heavy flooding is using up the country's financial resources.

Indonesia earlier announced that it would skip the global coffee retention plan set for October, as it needed extra funding.

Minister of Trade and Industry Luhut Pandjaitan said in earlier reports that the government had to seek help from the finance ministry as well as from the largest state bank, Bank Mandiri, to finance the export retention plan as coffee traders lacked the funding to do it themselves.

But Djoko said that joining the retention plan for the next three months required less capital than initially expected.

"Between October until January, it's hard to find coffee," he explained, estimating a production of only 40,000 tons during that period.

With farmers' coffee prices at about Rp 5,000 per kilogram, he said, the retention plan would cost the government only Rp 40 billion.

"However, we don't know yet whether after January we will continue to retain the coffee," he added.

Djoko said that a decision awaited further study on the conditions after January.

Chairman of the Association of Indonesian Coffee Exporters (AICE) Oesman Soedargo, however, gave a cool response to the government-sponsored retention program.

He said that the government should reconsider its decision to join the retention plan.

"The plan is not cheap, it may cost the government some Rp 360 billion or Rp 90 billion quarterly," he explained.

Oesman attributed tumbling world coffee prices to a supply excess of some 6.9 million sacks of coffee. One sack amounts to 60 kilogram.

Last year, he said, coffee production grew by 6 percent to 110.9 million sacks of coffee, while consumption grew by only 4 percent.(bkm)