No coffee cutbacks are required yet
JAKARTA (JP): Although the plan to cutback coffee production is still in effect, exporters will not be required to hold to up to 20 percent of their export volume -- at least for the next 10 days.
This change in export policy came as coffee prices went as high as 65.16 U.S. cents per pound on the world market.
General Secretary of the Association of Indonesian Coffee Exporters (AICE) Noer Madjid told The Jakarta Post on Saturday that this price would likely be effective for at least 10 market days, regardless of the minor fluctuations that might occur during that period.
"However, if the moving average of the prices at the end of this 10-day period shows that prices have fallen below 65 cents, then the cutbacks will be put into effect," he said, adding that this length of time prevented exporters from having to block their licenses right away.
Export licenses can only be obtained under the approval of the appointed PT Sucofindo consultant agency, as stipulated by a ministerial decree issued by the Minister of Trade last month.
The coffee retention plan was announced by the Association of Coffee Producing Countries (ACPC) last year. While other ACPC member countries have been carrying out the plan since Oct. 1, 1993 Indonesia has only started to implement the program on April 1.
Under the retention program, exporters are required to retain up to 20 percent of their export volume if prices fall to 60 U.S. cents per pound for Robusta coffee.
Decrease
The cutback system is based directly on the current price of coffee. With prices between 60.01 to 65 cents, the retained amount decreases to 10 percent and at 65.01 to 70 cents, no retention needs to be made. When prices exceed 70 cents per pound, the retained stock is released.
The retention plan was designed by the ACPC as a move to prevent further drops in coffee prices. The drop in coffee prices started when the quota system of the International Coffee Organization (ICO) collapsed. This quota system was abandoned as a result of squabbling over market share between several Latin and Central American producer countries.
Both of these two producers were and are supported by their main consumer, the U.S.
The ICO was established in 1962 by industrialized countries to set limits on coffee production. This was to protect producers and exporters in developing countries from creating an over- supplied market.
"The cutbacks have improved world coffee prices, although not all producing countries, such as India, Mexico, Thailand and Vietnam, have put it into effect. I think that, as more countries get involved, prices will continue to improve," Noer Madjid said.
"Since the US resigned from its membership in the ICO last year, the body has become more of a consultative forum rather than a policy maker. The ACPC has now filled the void as the dominating policy maker," he said.
According to the AFP news agency, ICO's 56 members -- 40 producers and 16 consumers -- met earlier last month in London to approve a new five-year pact to begin in October.
This new International Coffee Agreement (ICA) was said to be purely administrative and had no power to intervene in the market. However, ICO members have said that they are keeping open the option of making a pact to stabilize prices at some point in the future.
The sum of Indonesia's coffee exports during the previous coffee year (October 1992 to September 1993) reached 353,000 tons, 93 percent of which is the Robusta type. Coffee prices here currently range between US$1.35 to $1.40 per kilogram although the finest type -- which is the Toraja Arabica coffee and mostly exported to Japan -- may reach as high as $13 per kilogram. (10)