Business

Climate, demand boost coffee
exports

Abundant harvests and soaring demand from non-traditional coffee importers propelled Indonesia's coffee bean exports during the first half of the year, allowing the country to cash in on the high global price of the commodity.

More than 350 exporters grouped under the Association of Indonesian Coffee Exporters (AEKI) revealed recently coffee exports rose 12.5 percent to 180,000 tons between January and June this year compared to in the same period last year.

Executive Secretary of the AEKI, Rachim Kartabrata, told The Jakarta Post high rainfall this year had provided farmers with larger harvest yield.

"If such conditions continue, we are optimistic some 540,000 tons of coffee beans can be harvested this year, or up 6 percent from last year's 510,000 tons," he said.

The association expects total coffee exports to reach 170,000 tons in the second semester, and 350,000 tons for the year, up from 290,000 tons last year and 307,880 tons in 2006.

Robusta accounts for up to 80 percent of Indonesia's total production, while Arabica accounts for the remainder. Indonesia's main export destinations are the United States, western Europe and Japan.

Rachim said the jump in exports was also attributable to a surge in demand from emerging markets, including Russia, China, Taiwan, South Korea and Malaysia.

With higher-than-expected harvests, farmers and exporters are already capitalizing on the relatively high global coffee prices. Robusta is currently priced at US$2.2 per kilogram and Arabica at $3.08 per kg.

"From the current market price, farmers can still get higher profits because they only spend around Rp 3,500 (38 US cents) per kilogram on production costs," he said.

According to the association, coffee hit its lowest point on the global market in 2002, with the beans selling for as low as Rp 2,500 per kg, forcing 170 exports in Lampung, the country's biggest coffee-growing province, to go out of business.

Subsequently, many farmers turned to corn and cassava, which are simpler to cultivate and generally reap higher profits. However, current coffee production is still able to match domestic and global demand.

"Farmers will need only six months to harvest cassava crops, while they need up to three years to plant and harvest qualified coffee beans," Rachim said, adding that most coffee plantations in Indonesia were currently at their productive peak.

The AEKI estimates farmers in several Robusta coffee centers, including Lampung and South Sumatra, will enjoy high revenue during harvest season, which spans June and July.

Arabica farmers in North Sumatra and Nangore Aceh Darussalam will harvest again in October, having just come off the back of an enormous harvest in May.

However, Rahma, owner of coffee grower and processor CV Gudang Ketiara, in Takengon, Aceh, said global demand for coffee could slump due to the world-wide economic slow down.

"I heard that some buyers in Europe and the United States have capped their orders due to slow sales there. I hope the government can help us find new buyers from other non-traditional importers," she said.

CV Gudang Ketiara employs more than 150 workers and ships at least 18 tons of Gayo Arabica beans to Europe every month.

Indonesia is the fifth biggest coffee producer in the world, after Brazil, Vietnam, Colombia and Mexico.

Indonesian coffee is mainly traded in London and New York.

As reported by Bloomberg on Friday, coffee rose for a second day on the London commodity exchange due to speculation roasters had recently secured supplies when prices hit a two-week low.

Robusta coffee for September delivery climbed $17, or 0.7 percent, to $2,331 per metric ton on the Liffe exchange. Prices dropped 5.9 percent this week, the first decline in four weeks. Robusta beans are used to make instant coffee and espresso.

Coffee has climbed 22 percent in the past year, trailing a 45 percent rise of the UBS Bloomberg CMCI Index of 26 commodities, Bloomberg reported. (ewd)

Domestic coffee consumption
2006: 150,000 tons
2007: 160,000 tons
2008: 170,000 tons

Domestic coffee plantation area (hectares)
2007: 1,279,220
2008: 1,295,237

Imported coffee
2006: 10,000 tons
2007: 20,000 tons

Source: Indonesian Coffee Exporters Association (AEKI)

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