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Indonesia Coffee Roasters Buy Vietnam Beans, Supply Tightens
Lewa Pardomuan | October 06, 2011

Workers roast robusta coffee beans at Losari coffee plantation in Magelang, Central Java. Coffee roasters in Indonesia, the world’s No.2 robusta producer, have started to buy beans from rival Vietnam earlier than usual this year. (Bloomberg Photo/Dimas Ardian) Workers roast robusta coffee beans at Losari coffee plantation in Magelang, Central Java. Coffee roasters in Indonesia, the world’s No.2 robusta producer, have started to buy beans from rival Vietnam earlier than usual this year. (Bloomberg Photo/Dimas Ardian)
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Singapore. Coffee roasters in Indonesia, the world’s No.2 robusta producer, have started to buy beans from rival Vietnam earlier than usual this year at $40-50 premiums to London futures, including freight, due to falling output and rising consumption, dealers said on Thursday.

Indonesia’s annual domestic coffee consumption was growing at about 10 percent in the last five years, said Singapore-listed Olam International, the world’s largest shipper of robusta.

Olam estimated Indonesia’s consumption at up to 180,000 metric tons this year. 

“Historically, they normally buy Vietnamese beans just before the new crop in Indonesia arrives around January to March,” said a dealer in Singapore. 

“Because the crop in Indonesia this year is so small, they have to start buying Vietnamese beans much earlier because they can’t find so much beans they normally buy. They did buy some Vietnamese beans last year.”  

Two dealers in Singapore said the beans from Vietnam’s new crop, which is being harvested now, were purchased at premiums of up to $50 a metric ton to London’s March contract for delivery to Java. 

A dealer in Indonesia’s main growing island of Sumatra said roasters had to turn to Vietnam because local premiums remained high at $400 to London’s November contract, within sight of a record at $550 in August.

Beans from the yet-to-be harvested crop were also expensive at $150 to $200 premiums to the March contract.   

“Given the current situation, you have to buy beans from Vietnam. Some trading houses have already started selling beans for November shipment,” said a dealer in Bandar Lampung, provincial capital of Lampung on Sumatra. 

Indonesia’s coffee exports could fall about a third to 300,000 metric tons in 2011 as supply constraints will lead to tight stocks at the end of the year, the Indonesian Coffee Exporters Association said.   

Imports of green coffee beans are predicted to increase to 250,000 60-kg bags in the 2010/11 marketing year from 200,000 60-kg bags in the previous marketing year, according to a U.S. Department of Agriculture attache report. 

A Reuters poll showed Vietnam could see its biggest harvest ever with a median estimate of 21 million bags, up from 18.5 million bags in 2010/11, and well above the 19.3 million bags of 2006/07, its previous record.            

Reuters