Jakarta/Singapore, Nov 4 - Fears that more Indonesian coffee exporters had defaulted on shipments grew on Tuesday after a bank seized more than 10,000 tonnes of beans from an exporter in Sumatra following a repayment dispute.
Indonesia, the world's second-largest robusta producer after Vietnam, is in the spotlight after local exporters delayed shipments of at least 30,000 tonnes of beans to various buyers and could default on delivery in order to limit losses.
European dealers reported one major default by an Indonesian exporter last week and there was talk of more amid concerns that suppliers would refuse to deliver coffee after London futures dropped to a 17-month low recently.
"We heard that a major exporter has to delay shipments because of problems with loan repayment," said a dealer in Bandar Lampung, the provincial capital of Lampung on Sumatra.
Dealers said the bank seized the beans after the exporter missed interest payments, which also highlighted the financial difficulties suffered by many shippers in the main growing island of Sumatra after coffee prices dropped.
In Indonesia, coffee exporters normally agree on export commitments but delay decisions on prices until after beans have been delivered. Sumatran bean prices track London robusta futures.
The provinces of Lampung, South Sumatra and Bengkulu account for 75 percent of Indonesia's coffee output.
"I don't know about the exact amount of beans but I think it's more than 10,000 tonnes," said a senior industry official, adding that exporters normally borrow money from banks to buy beans from farmers during harvests.
Many exporters bought beans from farmers when local prices hovered around 18,000 rupiah a kg ($1.62) in August. The price has since dropped more than 20 percent to 14,000 rupiah, meaning exporters would suffer losses if they shipped out the beans now.
"I guess the amount of coffee which may be in danger of defaults can easily reach 40,000 tonnes now. It looks like the exporter which has problems with the bank is also the one that has defaulted on shipments," said a regional dealer.
Delays as well as defaults have created an artificial tightness in the market, with the Indonesia robusta quoted at $40 to $50 under London's January contract in Europe, more expensive than Vietnam offers of $140.
"There are very few beans coming out of Lampung recently. There are so many rumours about defaults and what I heard was that between 30,000 and 40,000 tonnes of beans have been defaulted on," another regional dealer said.
The Indonesian Coffee Association asked banks to be more flexible as exporters struggled to deal with liquidity problems.
"We can understand that banks must protect themselves from losses but they should also understand that the financial difficulties faced by exporters happen everywhere now," Chairmam Hassan Widjaya told Reuters. ($1=11,100 rupiah)