Indonesian coffee to revive S'pore market

Indonesian coffee to revive S'pore market

SINGAPORE (Reuter): The Singapore Commodity Exchange (SICOM)
is banking on increased participation from the Indonesian coffee
industry to breathe fresh life into its robusta coffee contract,
an exchange official said.

The delivery of the first 10 lots of Indonesian robusta
against the September coffee contract was an encouraging sign,
Raymond Chow, SICOM marketing and membership manager told a
Futures & Options World derivatives seminar here.

Only Vietnamese and Indian coffee has previously been
delivered against the contract, which came into operation in
March, but has attracted very limited trade participation.

"They (the Indonesians) use the London and New York markets
now, but I think they are becoming more aware of the SICOM
contract and will start to use it more," Chow said.

Chow said the exchange was confident it would have a viable
working contract by March, 1996 following a SICOM visit to the
main Indonesian coffee growing areas in June and subsequent
changes in the grade of coffee deliverable against its contract.

SICOM now allows Grade Two robusta with between 80 and 100
defects per lot to be delivered against the contract at a two
percent price discount to Grade One -- which was previously the
only grade deliverable with a permitted 80 quality defects.
Indonesia is the world's largest producer of robusta.

A senior Merrill Lynch official told a coffee conference in
London in September that liquidity in the SICOM contract could be
improved by a change in its delivery terms.

"It is an ex-warehouse contract and people don't want to pay
the premium," Merrill Lynch Global Commodities vice-president
Eric Nadelberg said.

Nadelberg said a switch to an fob specification, whereby the
seller would be responsible for the cost of moving the coffee
from the warehouse and loading it onto the vessel, could make the
contract more attractive.

But SICOM general manager Lim Toh Eng responded that an fob
contract could be disadvantageous to sellers and that there might
be problems caused by a lack of quality assurance.