RI to retain 40,000 tons of coffee to prop up prices
JAKARTA (JP): Indonesia plans to retain up to 40,000 tons of coffee until August this year as part of its commitment to prop up falling coffee prices in the world, Minister of Agriculture Bungaran Saragih said on Monday.
The minister said that the decision to join the coffee retention program initiated by the Association of Coffee Producing Countries (ACPC) last year was taken in October, 2000.
In the first stage, the duration of which began in October and is completed at the end of January, Indonesia would retain 8,000 tons or about 20 percent of about 40,000 tons of coffee which are available for exports during the period, he told a press briefing.
The minister's statement was issued ahead of ACPC's annual meeting to be held in London on Wednesday.
In the second stage of the Indonesian retention program, which will be carried out from February until May, about 14,000 tons or about 20 percent of 70,000 tons of coffee available for exports during the period will be withheld, Bungaran added.
In the third stage from June to August, according to the minister, another 18,000 tons will be withheld, also about 20 percent of 90,000 tons of coffee available during the period.
"In September we hope producers will no longer need to retain their coffee because in that period, coffee prices are expected to reach a minimum target of 80 U.S. cents per pound," he told reporters.
ACPC's major members made an agreement in September last year to retain 20 percent of the world's coffee exports in a bid to reduce oversupply.
Indonesia was at first reluctant to join the program, because of a lack of funds and the time required to wait for Vietnam and India, as other major coffee producing countries in Asia, to take part in the scheme.
"But, it is our commitment to participate since our President has expressed full support (in the scheme) during his visit to Latin American countries last November," Bungaran said in a reference to President Abdurrahman Wahid's commitment to the visiting chairman of the international coffee organization late last year.
Minister of Trade and Industry Luhut Pandjaitan confirmed on Monday that Indonesia had agreed to join the coffee retention program.
But he said that the retention plan would only start immediately after Finance Minister Prijadi Praptosuhardjo agreed to provide a loan to finance the program.
Luhut said that the finance ministry was expected to provide around Rp 55 billion in loans (US$5.85 million) to finance the first phase of the retention program.
"We're just waiting (for approval) from the finance ministry ... We expect to start (the retention plan) next week," Luhut told reporters following a meeting with Coordinating Minister for the Economy Rizal Ramli and Minister of Agriculture Bungaran Saragih.
Luhut said that the Rp 55 billion loan would be given to the Indonesian Association of Coffee Exporters (AEKI) to cover the extra costs for storage, insurance, and maintenance of the 8,000 tons of coffee to be kept under the first phase of the retention scheme.
At the press briefing, Bungaran said that the government had secured about Rp 200 billion in funds needed to support the retention program.
The money would primarily be used by AEKI members to buy coffee from local coffee producers, and to pay warehousing costs, he said.
He said that the money would be repaid to the government immediately after the retained coffee were released into the market.
The world's coffee supply reached over 123 million sacks in the world market by the end of last year, exceeding the demand of only 103 million sacks. Each sack amounts to 60 kilograms.
That makes the price of coffee hover at its lowest price of between 60 U.S. cents and 70 U.S. cents per kilogram on the world market as against the ideal price of US$1.20 per kilogram.(03/rei)