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Coffee Demand in Indonesia Seen Climbing to Record in 2016

May 7 (Bloomberg) -- Coffee consumption in Indonesia, the third-biggest grower of the robusta variety, may jump 33 percent to a record in the next two years as population and income increase in Southeast Asia’s largest economy.

Demand will probably rise to 400,000 metric tons in 2016 from an estimated 300,000 tons this year and 260,000 tons in 2013, Irfan Anwar, chairman of the Association of Indonesian Coffee Exporters and Industries, told reporters at a conference in Jakarta today. Output may total about 700,000 tons in 2014 from 650,000 to 700,000 tons estimated for last year, he said.

Rising domestic consumption may reduce supplies from Indonesia, where robusta accounts for about 80 percent of the output, and help a surge in prices of the beans used by Nestle SA in instant drinks. Futures of the more expensive arabica variety, brewed by specialty companies including Starbucks Corp., advanced in New York to a two-year high as drought threatened crops in Brazil, the top supplier. Robusta traded in London has jumped 27 percent this year.

“Population is increasing, income per capita is increasing and lifestyle is improving,” said Irfan, who estimated that the share of arabica production will rise to 25 percent in three years from 19 percent in 2013. “Improvement in coffee quality is also helping boost consumption.”

Arabica has surged 83 percent this year to reach $2.03 a pound on ICE Futures U.S. today, the biggest advance among 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. Robusta traded at $2,141 a ton on NYSE LIFFE.

Growing Demand

Indonesia became the world’s eight-largest coffee consumer in 2012 and second to Japan in the East Asia and Southeast Asia region, according to International Coffee Organization. The country produced 10.5 million bags of coffee in 2012-2013 of which 8.9 million bags were exported, U.S. Department of Agriculture data show. A bag weighs 60 kilograms or 132 pounds.

“Consumption has been increasing quickly, averaging 6.6 percent growth since 2000, and 5 percent per annum going back to 1990,” London-based ICO said in a report released this year. “With a population of nearly 250 million, per capita consumption is less than 1 kilogram per person, and shows significant potential for further growth.”

Indonesia’s economy has expanded under 6 percent for four consecutive quarters through March and domestic consumption accounted for more than half of that growth.

Arabica beans accounted for 59 percent of the world’s 153.3 million bags of coffee output in 2012-2013, according to USDA data. Indonesia produced 1.7 million bags of arabica that year to become Asia’s top producer of the beans, replacing India, USDA data show. Vietnam is the world’s biggest grower of robusta, followed by Brazil.

To contact the reporter on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net Ovais Subhani, Thomas Kutty Abraham

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