Coffee Semi-annual

An Expert's View about Coffee and Tea in Indonesia

Posted on: 26 Dec 2011

After registering an 11 percent production drop in MY 2010/2011, Post predicts that Indonesian coffee production will decline again by an estimated 20 percent to 7.5 million 60-kg bags in MY 2011/2012

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/6/2011 GAIN Report Number: ID1147 Indonesia Coffee Semi-annual 2011 Approved By: Dennis Voboril Prepared By: Jonn Slette/Ibnu Edy Wiyono Report Highlights: Indonesian coffee production is predicted to decline by 20 percent to 7.5 million 60-kg bags in MY 2011/2012. Indonesian domestic coffee consumption has grown from 1.78 million bags in MY 2009/2010 to 1.9 million bags in MY 2011/2012. Indonesian coffee exports are expected to decline by 23 percent to 6.35 million bags in MY 2011/2012. Commodities: Coffee, Green Production: After registering an 11 percent production drop in MY 2010/2011, Post predicts that Indonesian coffee production will decline again by an estimated 20 percent to 7.5 million 60-kg bags in MY 2011/2012. This prediction reflects an adjustment over Post’s previous production estimate of 7.9 million bags. The 20 percent drop in coffee production is caused by higher-than-average levels of rainfall during the following critical stages: Blossoming period (April-September 2010) Cherry ripening period (December 2010-January 2011) The first harvest period (March-May 2011). Disturbances in coffee production have resulted in the following issues: Coffee exporters are competing with domestic coffee processors in procuring green coffee beans. One exporter in Medan reported that the supply of green coffee from farmers is down 40 percent in MY 2011/2012. Some of the exporters are importing beans from other countries, Vietnam in particular, to honor already-signed sales contracts with foreign buyers. Generally speaking, bean quality is lower than in the previous marketing year. Medium quality coffee beans normally account for 65 percent of total bean exports. Due to lower quality, the share of medium quality beans in East Java this year has decreased by 25 percent. Farm-gate Robusta coffee prices have increased from 9,000-12,000 rupiah to 22,000-24,000 rupiah. Moreover, Arabica coffee prices experienced even stronger growth, increasing from 22,000-24,000 rupiah to 50,000-60,000 rupiah. Consumption: Indonesian domestic coffee consumption has grown from 1.78 million bags in MY 2009/2010 to 1.9 million bags in MY 2011/2012. Continued consumption growth results from the following observable factors: A mushrooming of traditional coffee shops in major secondary cities such as Medan, Aceh, Lampung, Pontianak, Bangka Belitung and other area in Sulawesi, Sumatra, and Kalimantan Islands. Fast food chain restaurants such as Kentucky Fried Chicken and McDonalds have integrated coffee shops into their outlets throughout Indonesia. In addition to Starbucks and Dunkin Donuts, other international and domestic chains are opening outlets throughout the country. This includes Excelso, Coffee Bean, Bengawan Solo Coffee, J.Co, Bakoel Koffie, Coffee Club, and Oh La La Café. This reflects a wider macro-trend of a growing middle class and a greater interest in a coffee culture. Number of large domestic coffee processors has increased from 77 establishments in 2007 to 81 establishments in 2011. Small and medium sized coffee roasters have also experienced strong growth over the same period. Instant coffee producers in Indonesia have consistently developed new products to promote higher sales. Initially, the Indonesian coffee industry just produced classic instant coffee (coffee only). These industries evolved to produce more 3-in-1 instant coffee products (instant coffee combines with sugar and non dairy creamer). Current trends are for developing lines of higher quality products that include 3-in-1 cappuccino, mocha-latte, espresso, cafe latte, vanilla latte, etc. Trade: Weather related disturbances in coffee production have resulted in reduced export growth over the last two marketing years. Indonesian coffee exports decreased by 500,000 bags to 8.25 million bags in MY 2010/2011. Exports are expected to further decline to 6.35 million bags in MY 2011/2012. Disturbances in production have slashed coffee supplies to exporters, leading to the imports from Vietnam and other coffee producing countries. Coffee import data show that Indonesia has imported 309,000 bags of coffee during the first five months of MY 2011/2012. The import volume is equal to 87 percent of total coffee imports over the entire previous marketing year. Post predicts that Indonesian coffee imports will increase to 735,000 bags in MY 2011/2012. Stocks: The decrease in production amidst positive growth of export and domestic demand resulted in significantly lower ending stocks. Indonesian coffee stocks are expected to decline from 33,000 bags in MY 2010/2011 to 18,000 bags in MY 2011/2012. Production, Supply and Demand Data Statistics: Coffee, Green Indonesia 2009/2010 2010/2011 2011/2012 Market Year Begin: Apr 2009 Market Year Begin: Apr 2010 Market Year Begin: Apr 2011 USDA Official New Post USDA Official New Post USDA Official New Post Area Planted 1,300 1,266 0 1,268 0 1,308 Area Harvested 1,200 1,165 0 1,170 0 1,210 Bearing Trees 1,280 1,230 0 1,235 0 1,270 Non-Bearing Trees 190 190 0 200 0 210 Total Tree Population 1,470 1,420 0 1,435 0 1,480 Beginning Stocks 108 108 533 503 33 33 Arabica Production 1,500 1,500 1,375 1,375 1,230 1,170 Robusta Production 9,000 9,000 7,950 7,950 6,655 6,330 Other Production 0 0 0 0 0 Total Production 10,500 10,500 9,325 9,325 7,885 7,500 Bean Imports 425 425 150 285 200 600 Roast & Ground Imports 0 0 0 10 0 135 Soluble Imports 0 0 0 0 0 0 Total Imports 425 425 150 295 200 735 Total Supply 11,033 11,033 10,008 10,123 8,118 8,268 Bean Exports 7,425 7,425 7,050 7,050 5,150 5,150 Rst-Grnd Exp. 0 0 0 0 0 0 Soluble Exports 1,325 1,325 1,200 1,200 1,200 1,200 Total Exports 8,750 8,750 8,250 8,250 6,350 6,350 Rst,Ground Dom. Consum 1,600 1,625 1,575 1,680 1,600 1,720 Soluble Dom. Cons. 150 155 150 160 150 180 Domestic Use 1,750 1,780 1,725 1,840 1,750 1,900 Ending Stocks 533 503 33 33 18 18 Total Distribution 11,033 11,033 10,008 10,123 8,118 8,268 1000 HA, MILLION TREES, 1000 60 KG BAGS
Posted: 26 December 2011

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