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Ample global supplies to put pressure on coffee prices

Coffee production in Indonesia, the world’s third-largest grower of robusta beans favoured by instant drinks makers like Nestle SA, will probably climb to the largest in four years in 2019, boosting global supplies and potentially further reducing costs for caffeine addicts.

Farmers in the Southeast Asian country may harvest 11.5 million bags, or 690,000 metric tonnes, in coming months, according to the median of estimates from four traders compiled by Bloomberg. That’s an increase of more than 5 per cent from last year, data from the U.S. Department of Agriculture show.

The weather was supportive for cherry development, Hutama Sugandhi, chairman of the Indonesia Coffee Exporters Association, said in a phone interview on Wednesday. Modest rainfall last year provided sufficient water for crops to produce good quality beans, he said. The harvest began in April and will peak in June or July, Sugandhi said.

Golden Triangle

The provinces of Lampung, Bengkulu and South Sumatra in the south of Sumatra island are the main robusta areas, producing about 75 per cent of the country’s output. Beans from the region are shipped from Panjang port in Lampung. The arabica variety is mostly grown in northern Sumatra and Java.

Farmers in the region known as the Golden Coffee Triangle have harvested about 20 per cent of their beans, according to Moelyono Soesilo, owner of PT Sumber Kurnia Alam, a Java-based trader. Rising supplies have cut prices of export grade robusta by 5 per cent to $1,540 a tonne this week from a month earlier, he said.

Deliveries to Panjang port more than doubled to 5,000 tonnes on Monday from a week earlier as farmers sold beans before the years main Islamic festival next month. Farmers released fresh beans from the new harvest because they need money for Ramadan and Eid al-Fitr despite lower prices, Soesilo said.

Ample global supplies have been piling pressure on world prices, cutting costs for roasters. Benchmark arabica futures traded in New York fell to 88 cents a pound this month, the lowest since 2005, while robusta futures in London slumped to $1,290 a tonne, the weakest in nine years. Robusta for July delivery lost 1.1 per cent to $1,321 on 17th May.

Source: Bloomberg