Indonesia, Vietnam eye coffee pact

Adianto P. Simamora, The Jakarta Post, Jakarta

The world's largest robusta coffee producers, Indonesia and Vietnam, are planning to cooperate to lift the commodity's price, the Indonesian Coffee Association (AEKI) said Friday.

Both governments plan to sign a memorandum of understanding to cooperate next month.

Under the program, the two countries would adjust the coffee export schedules to avoid oversupply in the markets.

AEKI vice chairman Nuril Hakim said the program also aimed to improve the quality of local coffee beans and cutting robusta output.

"The main purpose of the program is to prop up the price to $1 per kilogram in a bid to improve the income and living standards of local growers," Nuril told The Jakarta Post.

Today, robusta costs about 76 U.S. cent per kilogram, as against 41 cents in July.

Nuril said Rini would lead the Indonesian delegation comprising top ministry officials and the association's members next month. The time table for the signing, however, is being arranged. It will be followed by discussions over details on export scheduling.

Over the past year, both countries have also been trying to clinch a deal with India to control output in a bid to push up the prices. India, Vietnam and Indonesia account for 22 percent of total world coffee production, and 45 percent of robusta output.

In late July, the three countries agreed to form a joint consortium to buy and stock coffee from the local markets to jack up the price to around 90 cents per kilogram.

Under the retention plan, Indonesia earlier agreed to withhold some 100,000 tons of coffee, while Vietnam and India agreed to withhold 300,000 tons and 50,000 tons respectively.

But, thus far, the consortium has yet to be built, while the three countries have postponed their talks indefinitely.

In Indonesia, coffee growers have long complained about losses as revenue is much lower than production costs.

Many of them have neglected their crops, which resulted in a drop in the country's coffee output.

Indonesia produces about 500,000 tons of coffee a year. The provinces of Lampung, Bengkulu and South Sumatra account for 75 percent of the country's coffee output.