Update COVID-19 in Indonesia: 1,298,608 confirmed infections, 35,014 deaths (23 February 2021)
23 February 2021 (closed)
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Indonesian coffee shipments to Europe have risen on the back of the weak rupiah and larger coffee harvest. Robusta bean exports from the island of Sumatra grew 22.1 percent year-on-year in June 2015. Meanwhile, European traders expect these strong shipments to continue into July. The Indonesian rupiah is the worst-performing emerging currency in Asia tracked by Bloomberg, weakening about 7.2 percent against the US dollar so far this year. The positive side of a weak currency is that the country's exports become more attractive.
The US Department of Agriculture (USDA) expects Indonesia’s coffee output to climb to about 10.9 million 60-kg bags in the 2015-2016 cycle, up from 8.5 million bags in the preceding cycle. Further specified in terms of bean type, the USDA expects that Indonesia’s robusta production in the 2015-2016 cycle will reach 9.3 million bags, while the country’s arabica output is expected at 1.6 million bags. Increased coffee output in combination with the weak rupiah trigger expectation that Indonesian exports remain strong in the period ahead.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Meanwhile, Vietnamese coffee traders have been hoarding coffee output since the end of February 2015 after domestic coffee prices declined below 40,000 dong (approx. USD $1.85) per kilogram. Such hoarding contributed to short-term coffee supply tightness as well as a large premium for the front month in robusta futures.
However, as new Indonesian robusta coffee exports come at USD $30/40 per ton over September futures (for July/August shipment), compared with USD $50/60 for Vietnamese grade two bean shipments, Vietnamese traders should become encouraged to compete. ICE robusta futures prices are now hovering near a one-month low.
Indonesia’s coffee harvest season traditionally runs from May to October. In Vietnam, which still has large coffee stockpiles, the harvest is due to start in November.
Contrary to the higher quality arabica beans (mostly grown in Brazil), robusta beans are commonly used for the production of instant coffee. Europe is an important market for Indonesian and Vietnamese robusta beans.
Indonesia is the world’s second-largest robusta bean grower (after Vietnam) and the world’s third-largest coffee grower (after Brazil and Vietnam). Most of Indonesia’s coffee output constitutes robusta beans. The provinces of Lampung, Bengkulu and South Sumatra are the main robusta producing areas in Indonesia (a region known as the ‘Golden Triangle’ as it accounts for about 75 percent of Indonesia’s total coffee output). Arabica beans are mostly grown in northern Sumatra and Java and accounted for 16 percent of Indonesia’s total harvest in the 2014-2015 harvest year according to data from USDA.