Indonesia coffee exporters delay shipments, may default

SINGAPORE, Oct 22 (Reuters) - Indonesian coffee exporters have delayed shipments of at least 30,000 tonnes of beans to various buyers and could default on delivery after a sharp drop in London futures prices, dealers said on Wednesday.

Many exporters bought beans from farmers when local prices hovered around 18,000 rupiah a kg ($1.80) two months ago. The price has since dropped nearly 30 percent to 13,000 rupiah, meaning exporters would suffer losses if they shipped out the beans now.

'At least 40,000 tonnes have been contracted, and out of that amount around 30,000 tonnes may not be shipped out at all because of the risk of losing money. They want the (London) price to go back to $2,000,' said a regional dealer.

The beans from Indonesia's main producing province of Lampung on Sumatra have been allocated for delivery to buyers in Europe and the United States. Indonesia is the world's second-largest robusta producer after Vietnam.

London's January robusta contract shed $5 to end at $1,786 a tonne on Tuesday -- not far from a 17-month low of $1,642 hit two weeks ago. The contract rallied to $2,815 in March, its highest for the second month since July 1995.

'We can't confirm it because we haven't received any reports. The association hasn't got explanation from trading houses and exporters,' Suherman Harsono, chairman of the Lampung chapter of the Indonesia Coffee Exporters' Association, told Reuters.

Rumours that local sellers in Lampung are delaying shipments have been circulating in the market in the last few days as coffee prices tumble amid fears of a global recession.

The delays in shipments came after local coffee exporters said they planned to plan to set prices for coffee before shipment, rather than at delivery, to protect themselves from steeply falling values for the commodity..

In Indonesia, coffee exporters normally agree on export commitments but delay their decision on prices until after beans have been delivered.

'We've been hearing reports about defaults from Indonesia. I can't confirm it but I can't deny it either. So far I am okay because we have our office in Lampung that gets beans directly from farmers,' said a dealer at a trading house in Singapore.

Dealers said stock levels were steady between 80,000 and 90,000 tonnes in Lampung, with the harvest having peaked in August, and exporters could further delay shipments if there was no improvement in London prices.

'There's always a danger of default. Exporters are still expecting the market to recover to minimise the losses,' said the regional dealer.

Robusta beans make up around 85 percent of Indonesia's coffee output, estimated at around 450,000 tonnes this year, while the rest is higher-value, aromatic arabica beans.

The International Coffee Organization (ICO (nasdaq: ICOC - news - people )) said the global financial crisis could cut coffee supplies and people could drink more at home.

($1=9,980 rupiah)

(Editing by Kim Coghill)