Indonesia wants INCO to set coffee quotas

JAKARTA (JP): Indonesia will ask the Association of Coffee Producing Countries (ACPC) to impose production quotas on global coffee output to prop up falling coffee prices, an executive of the Association of Indonesian Coffee Exporters (AEKI) said on Tuesday.

"If coffee producing countries under ACPC agree on this (quota), we hope to see prices go up again," AEKI vice chairman Nuril Hakim was quoted as saying by Antara.

He said AEKI suggested the quota scheme to the government, and asked that it be proposed to ACPC at the group's next meeting on May 17.

Nuril added that if the production limit was imposed the impact would last for up to five years.

He said AEKI suggested imposing production quotas after a world coffee retention scheme failed to lift coffee prices.

Production quotas would require coffee farmers to limit output to remain within their country's set quotas. Under the retention scheme, it is coffee exporters who must hold back part of their supplies.

Indonesia said a number of times it would take part in the retention scheme, but a lack of funds to store the retained coffee prevented the government from following up its statements.

The upcoming ACPC meeting, Nuril went on, planned to discuss problems with the coffee retention scheme.

He said the present retention ratio of 20 percent of a country's coffee output was insufficient to impact market prices.

"Brazil and other ACPC countries view the retention ratio of 20 percent as no longer rational.

"The belief is if that we continue to follow this 20 percent ratio, it will not be able to offset high coffee output," he said.

He said that during earlier ACPC meetings, Indonesia had suggested a 40 percent to 50 percent retention ratio.

According to Nuril, Indonesia is ready to retain 50 percent of its coffee output if other countries follow suit. However, he did not say how the government would come up with the funds to store the retained coffee.

With the retention plan, coffee-producing countries hope to see coffee prices bounce back to the International Coffee Organization (ICO)'s reference price of 95 US cents a pound.

But with coffee supply outstripping demand over the past several years, coffee prices have remained far below IRO's reference price.

In Vietnam, Nuril said, coffee production was expected to hit 11.17 million bags this year, up from 8 million bags last year and between 2 million and 3 million bags five years ago. One bag equals 60 kilograms.

Brazil is expected to produce 32 million bags of coffee this year, up from 28.5 million bags in 2000, he said.

Indonesia and Columbia's coffee output had been relatively stable at 7.3 million and 12 million bags, respectively.

Nuril added that coffee producers were also pinning their hopes on a surge in coffee demand in nontraditional markets like China, Japan and Russia.

China, he said, consumed only 200,000 bags of coffee per year. Given the country's huge population and increased urbanization, observers see a great potential for growth in its coffee consumption.

He said Japan's coffee consumption had grown to 6 million bags a year from 667 bags in 1950. Nuril said the ICO was promoting coffee in these nontraditional markets.

Some coffee-producing countries like Guatemala, Mexico, El Salvador and Nicaragua have created a new demand for their coffee beans, using them as fuel for heavy industries, he said.

"Even this alternative can raise prices and help improve the welfare of farmers," he said. (bkm)