Indonesia's coffee output forecast cut on El Nino worries

Indonesia's coffee output will fall short of a previous estimate by around 50,000 tonnes this year due to an El Nino weather pattern that is likely to cause dry spells across key growing areas, an industry group said on Friday. The Association of Indonesian Coffee Exporters and Industries (AEKI), however, kept its forecast for exports by the world's No 4 coffee producer unchanged at 350,000 tonnes, indicating a limited impact on global robusta prices that are currently mired near 1-1/2-year lows of $1,566 per tonne.
Output from the Southeast Asian country, the world's No 3 robusta producer, is seen at 600,000-650,0000 tonnes this year, AEKI Chairman Irfan Anwar told Reuters. This would be lower than an earlier AEKI forecast of 650,000-700,000 tonnes and below 711,513 tonnes produced in 2014.
"The weather is not stable," said Anwar, referring to current weather patterns, including an El Nino that can lead to scorching weather across Asia and east Africa, but heavy rains and floods in parts of South America. In 2009, the El Nino brought the worst drought in four decades to India. It razed wheat fields in Australia and damaged crops across Asia. Food prices surged. Weather bureaus have confirmed its return this year.
"Robusta coffee is highly susceptible to lack of rainfall, with a relatively fast impact on crop yields," HSBC said. In Vietnam, the world's top robusta producer, dry weather has already set in and there are worries this could prompt farmers to hold back beans, Deputy Chairman Do Ha Nam of the Vietnam Coffee and Cocoa Association said.
Global robusta prices, however, have not yet factored in the threat to supplies from an El Nino. AEKI's Anwar sees prices of the bitter-tasting bean holding near current levels of around $1,622 a tonne, before rising early next year. Robusta beans are either blended with higher-quality arabica for a lower-cost brewed coffee or processed into instant coffee. Arabica beans are costlier and are currently trading at $2,778 per tonne.
There are about 2 million smallholders coffee growers in Indonesia, with robusta accounting for 80 percent and arabica most of the remainder. Higher prices for arabica will see its share rise to 25 percent within five years, Anwar said. AEKI is lobbying the Indonesian government to help increase domestic processing industries, said Anwar, who is also president director at Coffindo, an integrated coffee firm.