Thu, 30 Dec 2010

From: Reuters

By Lewa Pardomuan
Indonesia is reluctant to enter the physical market due to a lack of good-quality Robustas and an uncertain outlook for next year's crop, dealers said on Wednesday.

Rains in Indonesia, the world's second-largest Robusta producer after Vietnam, have caused the beans to shrink. The harvest ended in October, but dealers said rains persisted during the current flowering season in the main growing island of Sumatra.

Sumatran grade 4,80 defect was offered at a discount of $20 to London futures, steady from last week despite recent gains in March Robusta contracts.

"People are a bit careful about selling even though prices in London are high. We still have inquiries from roasters, but we don't see many beans being offered," said a dealer in Bandar Lampung, the provincial capital of Lampung on Sumatra.

"Last December, we would see offers for beans from the new harvest, but not this time. I guess people prefer to wait until January or February."

Better-quality beans still fetched a premium of $10 to $30 for prompt shipment, but they were difficult to find ahead of the next crop in April or May, which could yield poor quality beans.

"The quantity may be unchanged but the main problem is quality. Beans from the previous crop have turned black and shrank," said the Sumatran dealer. "This year, a lot of people have resorted to selling lower-grade beans."

The International Coffee Organization has estimated Indonesia's coffee output at 10.75 million 60-kg bags in the crop year to September 2011, down nearly 6 percent from the previous crop.

Flowering in Indonesia will be closely watched by dealers next week, in addition to price movements in London and New York, which are driven by fund buying. Trading in London resumes on Wednesday.