The recovery in Indonesia’s coffee exports looks poised to continue, backed by a strong rebound in production, and despite the extent of the crop that the country consumes itself.
Marex Spectron forecast that Indonesia’s net exports – that is, outgoing shipments less the imports which have been an increasing feature of late – will “exceed the average for the rest of the crop year”, as began in the country in May.
The forecast implies that a recent uptick in exports will set the tone for the rest of 2019-20.
Shipments from the major growing region of Sumatra soared 59% year on year to 24,047 tonnes (400,000 bags) last month, after a jump of 75% to 21,041 bags (350,000 bags) in September,
After a tumble in the early months of last year to levels that threatened to turn the country into a net coffee importer, exports have “recovered… and with the arrival of the 2019-20 crop are picking back up towards the five-year average”, Marex said.
‘Production has been high’
Indeed, the trading house, saying that “production has been high”, raised by 250,000 bags to some 11.5m bags its forecast for Indonesian coffee output in 2019-20, the best result in three years.
The upgrade offers extra supplies for shipment, after a rundown in stocks to “virtually” zero by the end of 2018-19, and with Indonesia’s growing domestic demand also sapping supplies.
“Internal consumption, on the other hand, is big and rising,” Marex said, noting that the International Coffee Organization puts it at 4.9m bags for this season, “while some trade houses work with well over 5m bags.
“This equates to between 40-50% of production and compares to about 10% for Vietnam, Colombia and less than 10% for Honduras.”
The US Department of Agriculture’s Jakarta bureau, in a briefing published last week, backed the ICO’s estimate for Indonesian coffee consumption in 2019-20, a reading up 600,000 bags year on year, and 1.34m bags from 2017-18.
“Consumer demand for coffee products remains strong,” the bureau said.
This was true “especially among the young and urban workforce that are driving sales at an increasing number of new coffee outlets in public spaces such shopping malls, transportation hubs and office buildings”.
Starbucks - which has 418 outlets in Indonesia, up by 69% in three years - has a 45% market share, with Excelso Cafe on 11.2% and Coffee Bean & Tea on 9%.
The bureau, citing "large supplies and competitive robusta prices", raised its forecast for Indonesian coffee exports in 2019-20, on an April-to-March basis, to 7.41m bags, although this remains below the 7.85m bags the USDA itself is factoring in.
It reported shipments last season at 6.15m bags.
The bureau’s production forecast - at 10.70m bags, in line with the official USDA estimate – represented an increase of only 100,000 bags year on year. Of the total, 9.45m bags comprise robusta, and 1.25m bags arabica coffee.
It reported “favourable weather in key production areas.
“Industry contacts report higher yields this year due to as major producing areas avoided extreme dryness or heavy rainfall.”