Indonesian robusta coffee was offered at a premium to London futures for the first time since June 2010 because of tight supply after rain early this year damaged coffee cherries, traders said.
The prospect of a relatively poor crop could see the premium hold for some months. Grade 4 Sumatra robusta bean were offered at a premium of $20 per ton to the July contract, or $2,499 per ton on a free-on-board basis in Lampung province.
“This year’s main harvest is not good because there was too much rain during flowering, hampering growth of coffee cherries,” a Jakarta-based trader said.
At the end of March, Sumatra robusta was offered at a discount of $50 to $70 per ton to London’s July contract. July robusta ended down $31 at $2,469 per ton on Thursday, but the contract has gained 17 percent so far this year because of tightness in supply.
The International Coffee Organization has estimated coffee stocks in producing countries at the start of the 2010/11 crop year were at the lowest level since records began in 1965. Indonesian robusta is likely to be at a premium until the harvest ends because of a lower crop, traders said.
“Prices can return to a discount if London rallied to $2,500 or $2,600 and supply is ample,” said a trader in Bandar Lampung, the key port for Indonesia’s robusta exports. Heavy rains last year caused some areas in Sumatra to start the harvest early.
Harvests usually begin in March or April, but farmers have been picking cherries since January as the flowering season began earlier in some areas. The previous crop ended last August.
“Some areas won’t even have a peak harvest this year. Farmers can pick cherries all year as higher rainfall causes sporadic harvests,” the Lampung trader said.
Exporters in Lampung remained cautious about selling from their stockpiles due to expectations of a smaller harvest.
“Exporters are only offering cargoes for nearby shipments. They don’t want to offer forward shipments because they worry about limited supply and want to avoid default on long-term contracts,” the Lampung trader said.
Robusta, which grows in Lampung, Bengkulu and South Sumatra, accounts for about 85 percent of Indonesia’s coffee production.
(Source: http://www.thejakartaglobe.com/business/tight-supply-lifts-indonesian-coffee-to-premium/435974)
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