Indonesia's coffee premiums revisit record at $550 tonnes

Premiums for Indonesian robusta coffee revisited a lifetime high of $550 a tonne against London futures on Thursday, a level earlier seen in August, because of supply constraints before the next harvest starts this year, dealers said.
Strong demand from local roasters and a bad harvest blamed on heavy rains this year have sent Indonesian coffee prices to levels never seen before. Indonesia is the world's second-largest robusta producer after Vietnam. "Everyone is short and there was business at $500 premiums earlier this month," said a dealer in Bandar Lampung, the provincial capital of Lampung in Sumatra, the main coffee-growing island. "Roasters and exporters alike are in need of beans. Premiums now range from $500 to $550 for November-December shipment."
The premiums for Grade 4, 80 Defect beans from the main growing island of Sumatra were priced against London's second-month January contract. In August, the premiums were priced against the expired September contract. "The market is very illiquid for nearby shipments, but occasional trade is done at expensive levels," said a dealer in Singapore.
The flowering season is underway in Sumatra ahead of the next harvest in December or January, with ample rains raising hopes of a better crop. In Vietnam, beans from the current harvest which started this month were at discounts of $50 to $60 to London's January contract.
Indonesia's 2010/2011 output fell 19.4 percent to 9.17 million 60-kg bags from 11.38 million bags in the previous season, while exports dropped 11.5 percent to 5.26 million bags, the International Coffee Organisation (ICO) said in its September report. Indonesia's annual domestic coffee consumption has grown at about 10 percent in the last five years, said Singapore-listed Olam International , the world's largest shipper of robusta. Olam estimated Indonesia's consumption at up to 180,000 tonnes this year. January robusta coffee on Liffe turned lower following the options expiry on Wednesday, falling $14, or 0.7 percent, to close at $1,899 per tonne.