RI applies coffee retention plan to boost prices
RI applies coffee retention plan to boost prices
JAKARTA (JP): The government has ordered a cut back of up to
20 percent in the country's coffee exports in line with the
Association of Coffee Producing Countries' second retention plan,
which is designed to prop up prices on the world market and
reduce stocks in importing countries.
Spokeswoman of the Ministry of Trade Lily Rosyana said over
the weekend that under the Minister of Trade's Decree No.
49/KP/III/95, dated March 31, Indonesia, a major Robusta coffee
exporter, will follow the association's retention plan for
Robusta only.
The retention plan is the second of its kind to be introduced
by the Association of Coffee Producing Countries (ACPC).
Lily explained that if the prices of Robusta coffee on the
world market drop below US$1.35 per pound, under the new ruling
Indonesian exporters will be required to stockpile 20 percent of
their exportable coffee.
The rate of retention will decrease to 10 percent if Robusta
prices range between $1.351 and $1.50 per pound. No retention
will be called for if Robusta prices range between $1.501 and
$1.60.
When prices exceed $1.60 per pound, exporters will be allowed
to release their retained coffee on the world market.
Under its first retention plan in late 1993, for comparison,
the ACPC required its members, including Indonesia, to retain 20
percent of their exportable coffee if market prices did not
exceed 60 U.S. cents and 10 percent if prices ranged between
60.01 cents and 65 cents. No retention was required when prices
ranged between 65.01 cents and 70 cents, while the release of
stocks was allowed when prices exceeded 70 cents.
Lily noted that exporters, who usually enjoy more profits when
world prices are high, will bear the costs of the retention plan
and are required to store their retained coffee at appointed
warehouses which will be supervised by state-owned surveyor
company PT Sucofindo.
Penalty
Exporters who violate the retention rules will be penalized by
having to retain twice or three times their actual due, depending
on the degree of their faults, she said.
The retention plan was first introduced by 29 members of the
ACPC in October 1993, when coffee prices dipped to their lowest
levels.
Indonesia applied the first plan in April last year, but
Indonesian exporters had difficulty retaining their coffee due to
the increasing prices of Robusta coffee.
Last year's highest price of Robusta was recorded at $1.82 per
pound or $4,140 per ton, occurring in September, while last
year's lowest price was $1.29 per pound, recorded in December.
Over the weekend, prices for Robusta on the London futures
market reached $3,095 per ton for May delivery, almost the same
as those of early this year.
According to the Minister of Trade's ruling No. 49/KP/III/95,
coffee farmers are entitled to receive 60 percent of free on
board (FOB) prices of coffee.
Exporters who are convicted of buying coffee from farmers
below 60 percent of FOB prices will face severe penalties,
ranging from the cancellation of export documents to the
revocation of their licenses as coffee exporters, Lily said.
Indonesia is a major Robusta producer in the world,
contributing about 23 percent to the world's Robusta market.
Robusta accounts for about 90 percent of Indonesia's total coffee
output.
Indonesia's coffee production reached 450,000 tons for 1994-
1995 coffee year (beginning in October). The Association of
Indonesian Coffee Exporters predict that the country's production
in 1995-1996 will likely fall to 375,000 tons.
Indonesia's revenues from coffee exports in the January-
September period of last year reached $617.08 million, indicating
a 135 percent increase over the same period of 1993. (rid)