Coffee premiums in Indonesia were largely unchanged this week despite strong demand and the harvest picking up pace, while Vietnamese premiums eased slightly, traders said. However, prices in the world's third-largest robusta producer after Vietnam and Brazil are still unlikely to influence global rates as most of the Indonesian produce is sold locally, they added.
Global production in 2016/2017 is forecast to rise 1.6 percent from this season to 155.7 million bags on higher arabica output, while Asia's output of mostly robustas would drop due to drought, the US Department of Agriculture (USDA) has said. Indonesia's production in the current season, ending March 2017, is forecast to drop 15 percent to 10 million bags due to the severe drought, the USDA report said.
Coffee futures edged lower on Wednesday, weighed by an abundant harvest in Brazil. ICE September robusta settled down 0.4 percent at $1,708 per tonne. Premiums of Indonesian robusta grade 4, 80 defects narrowed to $130-$140 a tonne to ICE September, from premiums of $140-$150 a week ago. "Demand is still there, but prices keep fluctuating," said an exporter in Lampung, referring to domestic purchases.
Indonesian prices remain uncompetitive compared with Vietnamese beans, which are $50 a tonne cheaper. Vietnam's robusta grade 1, screen 16, similar to Sumatran coffee, stood at premiums of $75-$85 a tonne to ICE September, down from $80-$90 a tonne last Thursday. Premiums for grade 2, 5 percent black and broken beans also eased to $30-$40 a tonne to the September contract, from premiums of $35-$45 a week ago.
Bids ranged at premiums of $20-$35 a tonne. Domestic prices edged up 1 percent from early this week to between 37.1 million dong and 37.4 million dong ($1,663-$1,677) a tonne on Thursday. "Sales have picked up slightly. While the external demand is not much with roasters and trading firms having their needs well covered for nearby terms," said a trader at a foreign firm in Ho Chi Minh City.
Output from seven Asian coffee producers, accounting for at least a third of the global production, could fall 7.8 percent in the next 2016/2017 season to 45.97 million 60-kg bags, the USDA said. The producers include Vietnam, Indonesia, India, Malaysia, Thailand, Laos and the Philippines, of which Vietnam and Indonesia produce a combined 27 percent of global output in 2015/2016, based on USDA data.