Indonesian Coffee Faces Disruption from El Nino

Trade Insights|17 August 2023

As per Reuters report, Reduced production of robusta beans, the primary variety of coffee produced in Indonesia, might lead to further increases in prices, which have increased by more than 40% in 2023 and reached a record high in June. After torrential rains reduced output to its lowest level in more than a decade and raised worldwide prices to all-time highs, El Nino's dry weather threatens to severely hamper coffee production in Indonesia, the fourth largest grower in the world. Data from the U.S. Department of Agriculture predicted that Indonesia will produce 9.7 million 60-kg bags of coffee in 2023–24, down from 11.85 million bags in the previous year and the lowest level since 2011–12. According to a U.S. government weather forecaster, there is a greater than 95% possibility that El Nino conditions will prevail from December 2023 to February 2024, increasing the likelihood of heatwaves and floods in numerous nations. Given that the end of 2023 and the beginning of 2024 are critical times for flowering and fruit production, plantations in Sumatra and Java are expected to suffer the most from any drought. Rain supports the majority of Indonesia's coffee crops. In Sumatra and Java, where precipitation has been more abundant recently, coffee production has decreased due to the fear of dryness. The government has encouraged farmers to replant trees by offering incentives like free coffee seedlings, discounted fertilizer, and low-interest loans. However, according to government data, only 2% of the entire coffee cropland has been replanted since 2018. The ministry is exploring a new program that would involve corporate buyers acting as both off-takers and trainers of growers in better practices. It has been compared to the nation's nascent plasma farmer program for palm oil, Indonesia's largest export. References: Kurniawati, Dewi., & Thukral, Navee. 2023. S&P Global; From too wet to bone dry: Indonesian coffee crop faces El Nino jolt. Retrieved from https://www.reuters.com/markets/commodities/too-wet-bone-dry-indonesian-coffee-crop-faces-el-nino-jolt-2023-08-14/ Image by freepik https://www.freepik.com/

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