Coffee exports from Indonesia, the world's second-largest robusta grower, will slip 17 percent to 374,000 tons this year due to rising domestic consumption, the country's industry minister said on Tuesday.
The exports will account for about 50 percent of overall output for the year, Mohamad S. Hidayat told reporters gathered at the ministry. Last year, exports of 451,000 tons accounted for about 60 percent of the country's output.
Coffee production would be little-changed from last year at about 748,000 tons, Hidayat said, adding that the government is encouraging that more of the beans be processed locally.
"This (policy) is aimed at increasing added value in the domestic market by absorbing local coffee beans to be processed into finished product," Hidayat said.
Premiums in both Vietnam and Indonesia - which together account for nearly a quarter of the world's coffee output - have been at multi-month highs as rains curbed supply and farmers held back their beans because of falling global prices.
Premiums for Sumatran grade 4, 80 defect beans last week climbed to $170 a ton to the September contract in London, the highest since mid-2012. In April, the Association of Indonesian Coffee Exporters and Industries forecast that exports would fall 5 percent to 494,000 tons, also citing rising domestic consumption. Indonesia's domestic coffee consumption is growing at a rate of 7.5 percent a year, Hidayat said.
About 95 percent of coffee output in Indonesia comes from smallholder farmers, covering around 1.3 million hectares.