Indonesian Coffee Premium Seen Rising as London Futures Decline

Buyers of coffee from Indonesia, the world’s third-biggest robusta grower, are paying a bigger premium for their beans as futures traded in London dropped and local prices remained firm, according to Volcafe Ltd.

Indonesian coffee for May and June shipments was at a premium of $90 a metric ton to the price on the NYSE Liffe exchange, the Winterthur, Switzerland-based unit of commodities trader ED&F Man Holdings Ltd. said in a report e-mailed today. That compares with a premium of $80 a ton a week earlier.

While robusta coffee futures in London plunged 5.6 percent over the past week to $1,975 a ton, local prices were little changed. Indonesian beans were trading at 19,000 rupiah ($1.95) to 20,300 rupiah a kilogram (2.2 pounds), Volcafe said. That compares with 19,300 rupiah to 20,500 rupiah a kilogram a week earlier.

“Offering differentials for nearby shipments have tightened,” Volcafe said, referring to a discount or a premium paid to obtain physical coffee in relation to the price on the futures market. “Prices on the ground remain firm.”

Indonesia has started to harvest its 2013-14 crop and production is set to climb to 11 million bags, according to Andrea Thompson, head of research and analysis at CoffeeNetwork, a unit of broker INTL FCStone Inc. That’s up from 10 million bags a year earlier. A bag of coffee weighs 132 pounds.

Coffee bean deliveries from farms in Indonesia rose to 2,400 tons to 2,600 tons this week, up from 2,100 tons to 2,250 tons a week earlier, according to Volcafe. Harvesting still has to start in the highland areas, according to the trader.

In Vietnam, the world’s largest robusta producer, sales from farms “came to a standstill” as futures declined, according to the report. Vietnamese beans for May and June shipments were at a premium of $90 a ton to the exchange price, up from a premium of $70 a ton last week.

“There is steady trade and industry demand in the market, but business was very limited as a result of very firm differentials,” it 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.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.