Planned export cuts pushes price of robusta coffee

Adianto P Simamora, The Jakarta Post, Jakarta

Although a plan by Indonesia and Vietnam, the world's biggest coffee producers, to limit robusta coffee exports has yet to come into effect, the price of the commodity had increased sharply over the past week, the Association of Indonesian Coffee Exporters (AEKI) said.

Nuril Hakim, secretary general of AEKI, said that the coffee price had risen by Rp 500 per kilogram or about 13 percent to Rp 4,200 per kilogram (about 50 cents dollar) last week, from the average of Rp 3,700 previously.

He said that the increase was due to moves by traders to purchase large quantities of coffee on the market to anticipate the planned export cuts by Indonesia and Vietnam.

"This is a good news for local farmers who saw low prices over the past three years," he told The Jakarta Post over the weekend.

Nuril predicts that if the two largest producing countries remain committed to the planned export cut scheme, the price of the commodity could easily increase to $1,000 per ton, or about Rp 8,000 per kilogram at the grower level here this year.

The Vietnam Coffee and Cocoa Association (VICOFA) and AEKI signed a Memorandum of Understanding on robusta coffee in June in Hanoi.

The MoU contained no concrete commitments, but AEKI admitted that the two countries, which contributed for around 60 percent of the world's robusta production, had in principle agreed to cut some 50 percent of their exports.

"We have not yet reached a final decision but we, in principle, have agreed to cut 50 percent of our exports this year to help prop up prices and increase growers' income," Nuril said.

He said that Indonesia would cut its exports by 170,000 tons, while Vietnam would cut its exports by 325,000 tons this year.

"We will meet sometime this month to further discuss how to implement the scheme," Nuril said.

Indonesia produces around 420,000 tons of coffee each year, of which more than 85 percent is exported.

Vietnam's coffee production leapt from around 413,600 tons in 1997-1998 to 900,000 tons in 2000-2001. For the 2002-2003 crop year, VICOFA has forecast a total output of 520,000 tons.

Coffee prices had been falling over the past three years due to oversupply.

The falling price of the commodity prompted some coffee growers in Lampung, the country's largest coffee producing area, to cut down their trees and plant vegetables, making it impossible for them to enjoy the possibility of higher prices next year.