Singapore. Premiums for Indonesian coffee slipped to $350 a tonne to London’s January contract , their lowest since September, as exporters started buying beans from Vietnam to meet outstanding contracts, dealers said on Thursday.
Exporters bought Vietnamese beans at premiums of up to $60 to London futures and mixing them with Indonesian coffee for sale to local roasters and other consumers — a practice which often happens when supply is tight.
“We know it’s adulterated coffee. Some people who can’t get local supply will start mixing local beans with Vietnamese beans,” said a dealer in Singapore.
Premiums for grade 4, 80 defect beans for prompt delivery, which hit a record of $550 in August, were also under pressure from the early arrival of coffee from the next crop in Indonesia’s main growing island of Sumatra.
But since beans from the new crop were still expensive at premiums of up to $200 to London’s March contract, some exporters decided to turn to Vietnam, where supply is abundant during a bumper crop.
Some coffee roasters on Java island have also bought beans directly from Vietnam at premiums of $40 to $50, including freight. Indonesia is the world’s second-largest robusta producer after Vietnam.
“The Vietnamese grade 1 beans are about the same quality as the 80 defect grade. They can buy the beans at prices much better than $350 premiums,” said another dealer in Singapore.
“They just roast the beans, and then exporters will mix them with local coffee before selling them.” Flowers have turned to cherries on some plantations ahead of the harvest, which normally starts in December or January.
Heavy rains damaged the previous crop earlier this year, causing a severe supply shortage that propelled premiums to records. Indonesia, now struggling with slumping coffee output due to hot and wet weather, has set an ambitious goal to be the world’s No.2 producer within five years, an executive at an industry association said on Wednesday.