RI to retain 40,000 tons of coffee to prop up prices

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)