Some Indonesian suppliers of arabica coffee, tempted by rising prices since the December tsunami that battered infrastructure in the country's key growing area of northern Sumatra, are defaulting on shipments to domestic buyers, traders said on Monday. Domestic prices for the aromatic, high-value arabica currently double levels a year ago were set to rise further, they said, as supply from Sumatra island remained tight.

"Only a trickle is coming out from (Aceh) province because of the transportation problems," a trader in Median said.

Arabica plantations, mostly on the volcanic highlands of Aceh and North Sumatra provinces, have not been directly affected by the tsunami that killed more than 100,000 people and left nearly another 130,000 missing in Indonesia.

But the killer waves that left 420,000 people homeless destroyed the region's infrastructure, forcing farmers and exporters to scale back shipments. Traders said they expected labour shortages would slow harvesting, which could lead to lower arabica output this year than the usual 50,000 tonnes a year.

Domestic arabica prices have jumped, traders said, as current supply lags demand. Mandheling arabica coffee is being offered at between $4,000 and $4,100 a tonne, on a free on board (FOB) basis, versus $1,900 to $2,000 a tonne a year ago, they said.

Traders said small-scale exporters were notorious for abandoning contracts or delaying shipments whenever prices move up sharply. "When supplies come in, traders are competing to secure enough beans to fill their commitments which then pushes local prices up even further," a trader in Bandar Lampung said.

"Several shipments are being rolled over from March to May and May to June, but buyers are not too happy," she said. Indonesia is the world's second-largest producer of robusta coffee, after Vietnam.

Robusta accounts for about 90 percent of its coffee-growing area, while arabica grown mainly on Sumatra and parts of Java covers the remainder. The United States, Japan and Europe are the country's main coffee buyers.

Indonesia has two main harvesting seasons for its arabica coffee. The main harvest runs from October to December, and the crop is usually marketed through March. The mid-crop is much smaller in size, and is harvested from March to May.

On robusta coffee, daily arrivals have slowed down in the past few weeks to 100 tonnes a day at the tail end of the mid-crop harvest. Robusta beans from the main harvest are expected to hit the market in March.

Copyright Reuters, 2005