Indonesian Coffee Production Increases, Prices Can be Decreased

Coffee production in Indonesia is predicted to rise to the largest number in four years by 2019. As a result, global coffee supply will increase and the price of this commodity can shrink further.

According to the median estimate of four traders compiled by Bloomberg, coffee yields in Indonesia can reach 11.5 million bags, or 690,000 metric tons, in the coming months.

That number was recorded to increase more than 5 percent compared to last year, based on data from the United States Department of Agriculture (US).

“The weather supports it. “The rainfall that was not too high last year provided enough water for plants to produce good quality seeds,” explained Hutama Sugandhi, Chair of the Indonesian Coffee Exporters Association (AEKI), as reported by Bloomberg.

Coffee harvesting, continued Hutama, starts in April and will peak in June or July this year. For information, Indonesia is the third largest producer of robusta coffee beans in the world.

As the main producer of robusta, Lampung, Bengkulu and South Sumatra provinces produce around 75 percent of total production in Indonesia. Coffee beans from the area were sent from Panjang port in Lampung.

According to Moelyono Soesilo, owner of PT Sumber Kurnia Alam who trades grain, farmers in the three regions known as the “Golden Coffee Triangle” have harvested around 20 percent.

“Increasing supply has cut exporta-grade robusta prices by 5 percent to US $ 1,540 per ton this week from the previous month,” Moelyono said.

Shipments to Panjang port more than doubled to 5,000 tons on Monday (05/13/2019) from the previous week along with efforts by farmers to sell coffee beans before Eid.

“Farmers sell coffee beans from their harvest because they need money for Ramadan and Eid al-Fitr even though the price is lower,” Moelyono added.

Meanwhile, abundant global coffee supply has added to pressure on world prices. The benchmark price of Arabica futures traded in New York fell to 88 cents per pound this month, the lowest since 2005.

The price of the robusta futures contract in London dropped to US $ 1,290 per ton, the weakest in nine years. In today’s trade, Friday (05/17/2019), Robusta coffee prices for July delivery fell 1.1 percent to US $ 1,321.

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