June 10 (Bloomberg) -- Coffee bean shipments from Indonesia, the third-largest robusta grower, are set to slump to the lowest level in two years as domestic processors boost purchases and the harvest drops because of rains.
Exports may fall 14 percent to 385,000 metric tons (6.42 million bags) from a year earlier, according to the median of estimates from seven exporters and a processor compiled by Bloomberg. That’s the smallest since 2011, according to data from the Central Statistics Agency. The crop may slide 10 percent to 595,000 tons (9.92 million bags), the survey showed.
Fewer cargoes from Indonesia may slow the decline in prices of the variety used in instant drinks by Nestle SA and Kraft Foods Group Inc. Futures fell 17 percent from a five-month high in March amid a surge in supply from Vietnam and Brazil, the top growers. The crop in Vietnam may jump 13 percent as global coffee output outpaces demand for a second year in 2013-2014, says Volcafe, the Winterthur, Switzerland-based unit of commodities trader ED&F Man Holdings Ltd.
“Production will drop because of the weather and after we had such a big harvest last year,” said Sumita, head of Lampung chapter at the Association of Indonesian Coffee Exporters and Industry. “Local consumption is increasing and everyone is competing for beans,” Sumita, who only uses one name, said in an interview in Bandar Lampung on May 28.
Robusta futures fell 11 percent in the past year and traded at $1,837 a ton as of 9:03 a.m. on NYSE Liffe in London. Prices of the milder-tasting arabica coffee used by Starbucks Corp. dropped 19 percent to $1.263 a pound in New York.
In the higher areas of Indonesia’s southern Sumatra, the crop will decline by as much as 50 percent to average 1.5 tons per hectare because of heavy rains, said 63-year-old Sunyoto, who heads a group of 37 farmers. The main harvesting will start in mid-June, one month behind schedule, said Sunyoto, who migrated from Java in 1977 and started planting coffee 30 years ago. A bumper harvest last year weakened trees, he said.
“Big production is not always a good story for us,” said Sunyoto. “Some have to stop farming for a year as the trees need a longer time to grow buds and produce cherries again.”
Production in Indonesia will drop 10 percent to 10.5 million bags in 2013-2014, according to Volcafe. The crop will decline 5.5 percent to 9.165 million bags in 2013-2014, the U.S. Department of Agriculture said in a report dated May 15. A bag weighs 60 kilograms (132 pounds).
International Coffee Organization data showing higher shipments may mean output is more than estimated, said Andrea Thompson, the Belfast, Northern Ireland-based head of research and analysis at CoffeeNetwork, a unit of broker INTL FCStone Inc. Shipments in April were 600,000 bags, up from 561,448 bags a year earlier, according to the ICO.
“There are still some bullish reports about Indonesia,” said Thompson. “If you look at the ICO exports, the flow from Indonesia is strong. The signals are there that output has been underestimated.”
Demand for the crop is increasing from local processors. Consumption may total 2.58 million bags in 2013-2014, 53 percent more than three years ago, according to USDA data.
The industry is outbidding exporters for supplies, said Sumita from the association. Local processors were ready to buy robusta beans at 21,000 rupiah per kilogram ($2,109 a ton) on May 28, he said. Shippers were offering about 19,000 rupiah, said Sunyoto, who receives a daily text-message with prices from a foreign exporter on his mobile phone.
Rains have delayed deliveries to Lampung warehouses, boosting the premium over international prices. Buyers were offering $135 a ton above NYSE Liffe for June/July shipments compared with $50 in April at the start of the crop year, said Moelyono Soesilo, a marketing and purchasing manager at PT Taman Delta Indonesia. Daily arrivals were 800 tons in the third week of May, compared with more than 1,000 tons year earlier, said Sumita from the association.
“Exports will depend on prices,” said Sumita. “We won’t curb shipments if prices are good, but we can see that supply pressure is very high from Vietnam and Brazil,” he said. About $2,200 a ton was the “ideal price” for exporters and farmers, he said. That’s 18 percent above the price on June 7.
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