Indonesian Coffee is actually Heating Up: is actually currently the Time to Get in on the Java Trade?

At the end of 2014, Indonesia experienced a sharp drop in coffee exports partly due to unfavourable weather conditions. Will the commodity fare better that will year?

Indonesia’s coffee sector may flourish that will year thanks to enhanced weather in production areas across the country. yet the increased output may still not be enough to satisfy foreign as well as local demand, which is actually both currently on the upswing, analysts say.

According to the Association of Indonesian Coffee Exporters (AEKI), the country harvests about 700,000 metric tonnes of coffee beans each year through 1.3 million hectares of cultivation area, that has a growth rate of 1 to 2 percent annually. Export turnover through the commodity, dominated by the Robusta strain that will’s normally used in instant coffee, is actually up to US$1.5 billion, the trade group claims. Indonesia is actually the globe’s second largest Robusta bean producer. The strain grows densely in South Sumatra in places like Lampung, Bengkulu, as well as some other nearby provinces, while the pricier Arabica bean mostly grows in North Sumatra as well as Java.

Coffee drying in a village in Lombok by Victor Ulijn

Photo by Victor Ulijn

“Indonesian coffee beans have higher quality as well as value compared to coffees through Brazil as well as Vietnam,” says Irfan Anwar, AEKI chairman. “Our coffee is actually currently exported to 100 countries, with our biggest importers coming through the US, Europe, as well as Japan.”

Industry experts project Indonesia’s coffee crop that will year will grow to 800,000 tonnes. yet harvest season is actually predicted to be later than normal due to mixed amounts of rain in some key crop-growing areas.

“Lack of rain could push back the harvest, while too much rain could degrade the quality of the beans,” says Armia Zuhri, director of the Sumatra Permata Gayo Cooperative in North Sumatra. “Lack of rain [in Aceh] in December as well as January means the harvest was pushed back to February, so [beans] are piling up that will month.” Zuhri’s cooperative produces 100 percent organic Fair Trade Certified coffee, as well as exports about 1,500 kilograms of coffee each year. Last year, the cooperative collected US$10 million through about 2,600 members, whose crops were mostly exported to the US, Europe, as well as Australia.

Last year, Indonesia as well as neighbouring countries such as world’s second largest overall coffee producer, Vietnam, faced climate anomalies caused by El Niño. that will ultimately led to a decline in exports.

While prices for Indonesian coffee beans within the global market fluctuated, Anwar says that will the cost tag for the archipelago’s beans at the moment is actually “more expensive” than Brazilian coffee, with the South American nation’s Arabica selling at US$6 per kilogram, as well as its Robusta at US$2.5 per kilogram.

The numbers at home are promising, too.

Coffee exports may have fallen 20 to 25 percent to 475,000 tonnes last year, yet higher local consumption may help offset the loss in 2015.

AEKI predicts that will local demand will jump 20 percent annually – through currently 1.3 kilograms per capita to 1.56 kilograms next year. that will sharp uptick is actually driven by a newfound fondness of a great ‘cup of Joe’ – particularly one brewed through single-origin specialty variants – among the country’s increasingly wealthy middle-class. A variety of upscale cafes can currently be found in Indonesia’s big cities, usually selling bags of specialty beans harvested through provinces like Flores, Gayo, as well as Toraja.

“The trend is actually not bad in helping local farmers distributing their coffee,” says Veronica Herlina of the Sustainable Coffee Platform of Indonesia (SCOPI), an organisation that will promotes Public-Private Partnership within the coffee sector to bolster sustainability of the local commodity. “Indonesia has the most specialty coffee within the globe, because every soil, culture, every [piece of] land, helps form these beans’ characteristics.” Single-origin specialty coffee also helps increase the country’s coffee quality, she says.

Coffee giant Starbucks also wants in on the action. The Seattle-based company is actually planning to double its number of stores in Indonesia through the current 200 to 400 outlets in several years’ time, according to Starbucks Indonesia COO, Anthony Cottan.

The trend is actually not bad news for all stakeholders within the industry, yet brand new players may think twice before entering the country’s already crowded Java business. If entrepreneurs took the traditional approach, they would certainly compete head-to-head with veterans as well as household names like Kapal Api Global, Sari Incofood Corporation (the owner of Indocafé), as well as some other multinational coffee players such as Italy’s Illy as well as Japan’s Ueshime Coffee Co.

However, Indonesia still needs to wake up as well as smell the coffee. Analysts as well as industry watchers believe that will local farmers may not be able to meet increasing demand in an industry that will’s largely unsettled by climate change as well as lack of sustainability programs.

Photo by McKay Savage

Indonesia produces about 750 kilograms per hectare as well as is actually the globe’s third biggest coffee producer behind behemoths Brazil as well as Vietnam, which produce four tonnes as well as two tonnes per hectare, respectively. Southeast Asia’s biggest economy is actually always sprinting with Colombia, where the annual yield is actually roughly on par with Indonesia’s. that will means that will the number three position largely depends on weather conditions in both countries, year after year.

“We aim to improve output to one tonne per hectare, or about a 25 percent increase through our current output by 2018 or 2020,” says Anwar. “I believe that will the idea’s a realistic target.”

To help achieve the target, AEKI recently signed a Memorandum of Understanding (MoU) with the Vietnam Coffee-Cocoa Association. Under the MoU, the two nations will exchange information on coffee prices between the two markets, as well as share techniques to improve productivity as well as profit, according to Anwar.

“Indonesia as well as Vietnam are the globe’s leading coffee producing countries, so we need to advance our cooperation,” explains Anwar. “We can learn how to improve productivity as well as better marketing through Vietnam.” Vietnam’s total cultivation area is actually smaller than Indonesia, with only a little more than 600,000 hectares, yet the country’s productivity as well as export levels are higher. Each year, Vietnam exports one million tonnes of coffee beans, that has a turnover of more than US$3.4 billion.

to improve productivity, however, farmers, coffee companies, as well as stakeholders within the business also must ensure that will their farming practices are sustainable. According to a research note released last year by TechnoServe as well as Sustainable Trade Initiative (IDH), Indonesia has three times as many smallholder coffee farmers as Vietnam, yet only one third of the coffee yield: “Low farmer output as well as the highly fragmented nature of Indonesia’s production base make sustainability programs significantly more expensive than in Vietnam.”

The researchers also estimate that will only seven percent of Indonesia’s coffee exports are currently certified as “sustainable”. If the Indonesian coffee sector doesn’t change its current course, as well as with exports declining in significance, “sustainability efforts are likely to plateau,” says IDH.