RI waits for Vietnam, India before starting coffee retention

JAKARTA (JP): Indonesia has delayed its plan to join the Association of Coffee Producing Countries (ACPC) coffee retention program.

A source at the Ministry of Industry and Trade said on Friday that the government had told ACPC executives that it would only join the retention program if Vietnam and India did the same.

"Otherwise, joining the retention program is as useless as putting salt into the ocean," he said.

Indonesia pledged last month to start retaining its coffee by about 8,000 metric tons until the end of this year.

The amount makes up about 20 percent of the country's total estimated coffee production of 40,000 tons within three months starting in October.

Through the retention program, ACPC plans to retain 20 percent of its coffee exports and help curb the drop in the price of coffee.

The source said world coffee prices had plunged to about 70 U.S. cents per kilogram from the ideal price range of about US$1.20 per kilogram.

He said the world coffee supply stood at over 123 million sacks of coffee while demand was only for 103 million sacks. One sack amounts to 60 kg.

However, despite ACPC enthusiasm to introduce the retention program, only a few members have begun to realize the plan.

The world's largest producers, Brazil and Columbia, have committed to reducing their coffee exports by 750,000 tons and 350,000 tons respectively as part of the retention program.

Indonesia was at first reluctant to join the program, because of a lack of funds. In order to buy 8,000 tons of coffee from the domestic market, the government must provide Rp 40 billion ($4.3 million). But it later said it would start to implement the program last month.

He said Indonesia backed off from its plan because Vietnam and India, also major coffee producers, had not yet decided their position.

He said a letter from the Vietnamese government to ACPC, claiming that the country had decided to join the program, remained unchecked.

The Association of Indonesian Coffee Exporters (AICE) will soon send a team to Vietnam to verify its participation in the program, he said.

He further said the government had thus far no plans to join the retention program in January next year.

A commitment, he said, would depend on next year's market condition.

Oesman Soedargo, the former AICE chairman, said earlier that joining the retention program might cost the government some Rp 360 billion or Rp 90 billion quarterly.(bkm)