London/Singapore. Indonesia’s coffee output is likely to hit a record of over 12 million 60-kg bags this crop year, the International Coffee Organization said on Monday, raising its forecast for the world’s third-largest producer by 13 percent.
The ICO did not give any reason for growing output in Indonesia, but Reuters surveys have shown that favorable weather should boost production.
But the upward revision for Indonesia was offset by reduced forecasts for some Latin American countries that have been grappling with coffee leaf rust, prompting the IOC to keep its outlook for global output unchanged at a rise of nearly 8 percent.
That prediction will continue to drag on global prices, already under pressure from an abundant off-year crop in top producer Brazil. New York arabica futures, which set the tone for London robustas, are still trading near a four-year low despite a recent rebound.
“I think the situation is disturbing. If you look at the entire situation now, we can’t hope for anything on the demand-side to push up prices,” said Joyce Liu, an investment analyst at Phillip Futures in Singapore.
“We really need to see some tightening in supply, whether in the form of farmers not willing to sell, a reduction in production or some export restriction to provide a kind of support for the market.”
World coffee production is expected to rise 7.8 percent from the prior season to 144.6 million 60-kg bags in the 2012/13 crop year, the ICO said in its June report, unchanged from its May forecast.
The rise has been driven by larger crops in key producing countries. Brazil’s output is unchanged from the May forecast at 50.83 million bags, but Indonesia’s production was revised up to 12.73 million in the current crop year from the 11.250 million bags estimated in May.
That means Indonesian output is on target to rise about 75 percent from the previous year, the ICO said.
Colombia’s output is expected to climb 24.1 percent to 9.50 million, higher than 8 million bags forecast in May.
Indonesia is the world’s second largest robusta producer after Vietnam, and the two countries together account for nearly a quarter of the world’s coffee output.
Robusta is either blended with higher-quality arabica beans for a lower-cost brewed coffee or processed into instant coffee. Falling global prices have prompted farmers in Vietnam and Indonesia to hold back stocks, sending premiums to multi-month highs.
Elsewhere, the ICO reduced its forecasts for Mexico and El Salvador due to the spread of roya, or coffee leaf rust.
“Coffee leaf rust has severely affected production in Central America, with total damage in the 2012/13 crop year estimated at around 2.7 million bags, costing some $500 million,” said the ICO.