Singapore. Indonesia’s coffee premiums jumped and could strengthen again next week after the harvest ended in the world’s second-largest robusta producer, but discounts widened in Vietnam as the new crop looms, dealers said on Thursday.
The extended harvest ended this month in Indonesia’s main growing island of Sumatra, while last year it ended around August. Heavy rain damaged the crop in the 2011/12 season, causing a severe supply shortage that sent premiums to record highs of $550 last year.
Robusta is either blended with higher-quality arabica beans for a lower-cost brewed coffee or processed into instant coffee.
“The season is coming to an end, so there’s less coffee available and London is also falling. Premium is more like $40 now,” said a dealer in Singapore who trades robustas from Indonesia and Vietnam.
“There are bits and pieces of coffee traded. The local market is very quiet, so the beans are exported at those premiums.”
Last week, Sumatran grade 4, 80 defect beans were quoted at $10 above London’s January contract for October-November delivery. Beans in top robusta producer Vietnam were offered at discounts to futures.
Indonesia’s coffee production in the 2012/13 season is forecast at 9.7 million bags, an increase of 1.4 million because of favorable weather, according to the U.S. Department of Agriculture.
A minor crop is expected to start in December ahead of the main harvest in April next year. Indonesia and Vietnam account for about 23 percent of global output, according to the International Coffee Organization
“All coffee regions are getting regular rains. But we may need to wait until December or January before we can come up with accurate production figures,” said a dealer in Java who recently toured coffee plantations in Sumatra.
“I think robusta demand is still strong because roasters are changing the structure of their blend. They are using more robustas.”
In Vietnam, grade 2, 5 percent black and broken beans were offered at discounts of $50 a tonne below London’s January contract, bigger than $25 last week.
“There isn’t really much trading. I guess trade ideas are at minus $80 or minus $90,” said the dealer in Singapore.
The new harvest is under way in Vietnam, where the previous 2011/12 crop ended with a record-high output of around 1.6 million tons. The current harvest is expected to peak in mid-November.
New York arabica futures, which often dictate movements in robusta, fell on Wednesday, with December falling 1.05 cents to settle at $1.5980 per lb. The contract hit $1.5715 last week, the lowest level for the front month since Sept. 6.
January robusta coffee futures inched down $1 to settle at $2,057. London futures have dropped about 8 percent since hitting a 2-month high in early October due to worries about ample global coffee supply.