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By Bloomberg

Coffee shipments from Indonesia, the third-biggest producer, will probably extend their decline in 2015 as domestic consumption increases in the world’s fourth most populous nation.

Overseas sales will tumble about 10 percent after dropping as much as 15 percent in 2014 from 480,000 metric tons last year, according to Irfan Anwar, chairman of the Association of Indonesian Coffee Exporters and Industries. Local demand will climb to about 350,000 tons in 2015 from 300,000 tons this year and 260,000 tons in 2013, he said in an interview.

Shrinking supplies from Indonesia may support robusta futures, which have surged 19 percent in London this year as the market heads for its biggest shortage since 2006. The harvest in Vietnam, the top grower of beans used by Nestle SA in instant drinks, is set to drop, a Bloomberg survey shows, while a drought has hurt trees in Brazil, the largest producer of arabica beans and the second-biggest supplier of robusta.

“Coffee shops are growing with more creative products and better marketing programs,” Irfan said at a conference in Ho Chi Minh City on Dec. 5. “There’s a new culture of drinking coffee. In the past, only old men drank it. Now teenagers also drink coffee.”

Robusta closed at $2,011 a ton on ICE Futures Europe yesterday. Arabica, favored by Starbucks Corp., climbed 63 percent this year to $1.8045 a pound. Arabica’s premium over robusta was 89.23 cents, down 28 percent from a two-year high on Oct. 14.

New Lifestyle

Consumption in Indonesia is driven by demand from young people, rising incomes, changing lifestyles and more knowledge about the beverage, Irfan said in a conference presentation.

“There are so many people there, so there is a lot of capacity for growth and it won’t be leveling out anytime soon,” Keith Flury, head of coffee research at Volcafe Ltd., a unit of trader ED&F Man Holdings Ltd., said in an interview.

Vietnam is also seeing faster growth in local demand as the young generation favors coffee and many micro-roasters are emerging, according to Luong Van Tu, chairman of Vietnam Coffee & Cocoa Association, in an interview.

Exports from Vietnam are rising as Indonesian shipments decrease. Sales are set to climb in 2015 because stockpiles were a record high at the end of September, Flury said at the conference. Exports in the first 11 months of this year jumped 35 percent to 1.58 million tons from a year earlier, according to estimates from the General Statistics Office.

While the rate of consumption growth is probably similar in the two countries, the increase in demand is spurring Indonesia to boost imports, especially from Vietnam, Flury said.

World Shortage

Overseas purchases by Indonesia are estimated at 70,000 tons this year, said Irfan from the exporters association. The harvest will be about 700,000 tons in 2014 and in 2015, he said.

The worldwide shortage of robusta beans will probably be 3 million bags of 60 kilograms (132 pounds) each in 2014-2015, wider than a previous estimate of 1.9 million bags, according to Volcafe based in Winterthur, Switzerland. Global coffee supplies, which also include arabica, will lag behind demand by 9.9 million bags, the company estimates.

The crop in Vietnam will slide to 1.65 million tons in the year started Oct. 1, according to a survey of 12 traders compiled by Bloomberg and published on Dec. 2. That’s 3.5 percent less than the record 1.71 million tons a year earlier.