Indonesian Coffee Premium Seen Lower as 2013-14 Harvest Begins

Buyers of coffee from Indonesia, the third-biggest producer of the robusta variety, are paying a smaller premium for the beans this week, with the harvest of the 2013-14 crop in the lowlands starting, according to Volcafe Ltd.

Indonesian beans for shipment in April and May were at a premium of $40 a metric ton to the price on the NYSE Liffe exchange in London, Volcafe, a unit of commodities trader ED&F Man Holdings Ltd., said in a report e-mailed today. That compares with $50 a ton last week.

“It seems that lowlands started to harvest and the first new crop coffee is flowing into Lampung,” said the Winterthur, Switzerland-based trader. “Local traders are eager to sell their coffee due to higher domestic prices,” it said, adding that differentials were weakening for shipments from May onward.

A differential is a premium paid or discount obtained for beans in the physical market in relation to the futures price.

Coffee deliveries from farms in Indonesia rose to about 1,350 tons to 1,500 tons this week, according to Volcafe. That compares with 700 tons to 800 a tons in the prior period, the trader said in a report e-mailed March 8.

Local bean prices were 20,300 rupiah ($2.09) to 21,500 rupiah a kilogram (2.2 pounds), up from 19,700 rupiah to 21,000 rupiah last week, Volcafe data showed.

In Vietnam, the world’s largest robusta producer, beans are at a premium of $50 a ton to the exchange price, the highest since the 2012-13 season begun there Oct. 1, according to the report. That is unchanged from last week.

“Overseas demand is waiting for differentials to come off the boil, although some buyers have no option but to close their eyes and cover shorts,” the trader said.

In India, about 80 percent of the crop has been gathered and harvesting is set to finish by the end of the month, Volcafe said.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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