SINGAPORE/JAKARTA May 14 Indonesia's coffee output is likely to see a modest increase in the next crop year to September 2014, but strong domestic demand will boost consumption by nearly a third to more than four million 60-kg bags, a Reuters survey showed on Tuesday.
Higher home consumption would trim the volume of beans available for export. Among coffee exporting nations, Indonesia is the second-largest consumer after Brazil. It makes up about 3 percent of global production of 144.65 million bags in the year to September 2013, the International Coffee Organization says.
"Local consumption is getting higher because more young people love to drink coffee," said Moelyono Soesilo, purchasing and marketing manager at Taman Delta Indonesia, a Java-based exporting firm.
"Local coffee shops and independent, small roasters are flourishing. We will see that in the next three to five years, it is easy to increase local consumption to seven to eight million bags."
The world's second-largest robusta producer after Vietnam will consume 4.16 million 60-kg bags of coffee in 2013/14, or more than a third of domestic output, a survey of eight dealers, analysts and industry groups shows. That is higher than 3.2 million bags estimated in an October survey.
The ICO put Indonesia's consumption at 3.667 million bags in the current year, up about 10 percent from the previous crop year. Robusta is a bitter-tasting variety used in instant coffee, which is gaining in popularity in Asia.
Although late arrivals from plantations during the current harvest in the main growing island of Sumatra have raised fears output could miss expectations, dealers expect the crop to pick up later in May and throughout June.
Demand from domestic roasters, however, has kept Sumatran beans at premiums of up to $90 a tonne to London futures , within sight of a 4-month high at $100, hit in April.
Heavy rain damaged the crop in the 2011/12 season, causing a severe supply shortage that drove premiums to all-time highs at $550. Sumatran beans normally sell at, or slightly below, London futures, whenever the harvest peaks.
Output in the year to September 2014 is forecast at 11.2 million bags, higher than the new estimates of 10.87 million bags in 2012/13, because more plantations in Java, Sumatra and eastern Indonesia have begun producing coffee.
"The crop has been delayed a bit but we are quite positive. If it happens to be down, output will probably fall by 3 or 5 percent only, but the crop looks good," said a dealer at an international trading house in Singapore.
"Consumption is rising. A 15-percent increase will be the conservative estimate, and we may see a maximum increase of 30 percent."
Southeast Asia's biggest economy, with a population of 240 million people, has proved resilient to the global economic slowdown, and domestic consumption has lured foreign investment.
Processed food producers, such as PT Mayora Indah, as well as the world's biggest food company Nestle SA, , use more coffee to fill rising demand for items such as biscuits, drinks and coffee-flavoured sweets, said dealers.
"Coffee prices in the 2012/13 year are still good for farmers, which is why they feel optimistic and take good care of the crop to boost output in coming years," said Saidul Alam, an official of the Indonesian Coffee Exporters Association. (Reporting by Lewa Pardomuan; Editing by Clarence Fernandez)
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