Indonesian Coffee Hits First Premium Since Mid-2010

Indonesian robusta coffee beans were 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 on Friday.
The prospect of a relatively poor crop could mean the premium holding for some months, they said.
Sumatra robusta beans Grade 4, 80 defects, were offered at a premium of $20 a ton to the July contract LRCc2 for shipment in May/June, or $2,499 a ton on a free-on-board basis in the main growing province of Lampung on Sumatra, traders said.
"This year's main harvest is not very good because there was too much rain during flowering, hampering growth of coffee cherries," said a Jakarta-based trader.
"This has pushed up robusta prices in Lampung to a premium of $20," the trader said.
At the end of March, Sumatra robusta was offered at a discount of $50-$70 a ton to London's July contract. LIFFE July robusta LRCc2 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 beginning of the 2010/11 crop year were at the lowest level since it began keeping records in 1965.
Indonesian robusta beans were likely to be at a premium until the harvest ends because of an expected lower crop this season, 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 coffee areas won't even have a peak harvest this year. Farmers can pick cherries throughout the year because higher rainfall has caused sporadic harvests," the Lampung trader said.
Exporters in Lampung remained cautious about selling from their stockpiles due to expectations of a smaller harvest this year, wanting to ensure they have enough beans for forward contracts.
"Exporters are now only offering cargoes for nearby shipments. They don't want to offer forward shipments because they are worried about limited supply and trying to avoid default on long-term contract," the Lampung trader. said.
Robusta, which is used in instant coffee, mostly grows in Lampung, Bengkulu and South Sumatra provinces at the southern end of Sumatra island and accounts for about 85 percent of Indonesia's coffee production. The rest is higher value, aromatic arabica coffee.
In Vietnam, indicative offers for robusta grade 2, 5 percent black and broken coffee were steady from last week at a discount of $70 a ton to London's July contract.